Fonterra GlobalDairyTrade dairy prices up 16.5%

International dairy prices rose a further 16.5% in last night's GlobalDairyTrade auction, an even larger increase than had been anticipated by the NZX futures contracts. Whole milk powder prices rose 20.6% and skim milk powder rose 17%. 

The latest rise in prices follows a statement by Fonterra last week reaffirming its view that milk collection will be lower this season by 2-3% (previously stated as -2%). Milk production is likely to slow of its own accord given the low returns expected for this season. But it's the weather - the as-yet unknowable impact of an El Nino pattern this summer - that will be the ultimate arbiter. 

"For now we are maintaining our forecast of a farmgate milk price of $4.30/kg for this season, but the risks lie to the upside," commented Westpac Research.