Global dairy price recovery back on track after fourth straight rise

(Reuters): Global dairy prices rose for the fourth international auction in a row, a strong indicator that last year’s recovery is back on track.

The GDT Price Index climbed 3.6%, with an average selling price of $ 3,166 per ton, in the auction held on 5 May. The index had risen 3.1% at the previous sale.

After two years of declining prices, farmers and analysts had been concerned that a 50% rebound during 2016 could be temporary. Prices were also dented at the beginning of the new year as global supply increased.

Flooding in New Zealand, the world’s largest dairy exporter, had raised concerns about sluggish production in the near term, which had helped been helping boost demand.

 Much of the gain at the latest auction was on the back of buyers in China.

“There was strong participation in the auction by buyers from North Asia, said Amy Castleton, analyst at Agri HQ.

“A lack of profitability in China’s own dairy farming sector has limited expansion of some farming operations and is expected to have some impact on their domestic milk supply,” she added.

Prices for whole milk powder rose 5.2%, while skim milk powder fell 0.9%.

A total of 22,633 tons was sold at the latest auction, falling 1.3% from the previous sale.

The auction results can affect the New Zealand dollar as the dairy sector generates more than 7% of the country’s gross domestic product.

The kiwi firmed to $ 0.6941 from $ 0.6905 per US dollar before the auction.

GDT Events is owned by New Zealand’s Fonterra Co-operative Group Ltd, but operates independently from the dairy giant. US-listed CRA International Inc is the trading manager for the twice-monthly Global Dairy Trade auction.