International dairy prices up 9.9%

International dairy prices rose a further 9.9% in last night's Global Dairy Trade auction, broadly in line with what was implied by the NZX futures prices. There were strong gains for whole milk powder (up 12.9%) and skim milk powder (up 13.4%), while cheese saw just a 0.5% rise and butter prices fell 2.3%. 

The global dairy market has reacted strongly to Fonterra's predictions of a drop in milk production this season, with prices up 63% from their lows two months ago. However, notwithstanding the threat of drought over this summer, the drop in production is now at risk of being overstated. Consequently, we could see international prices soften again by the end of the season.