Global dairy prices moved up by 4% with SMP touching USD 3274/MT

Dairy prices jumped 4 per cent at the global auction overnight, the biggest increase in six months, with gains across all products.

The global dairy trade price index posted its biggest increase since early March, when it jumped 15%.

The average price for whole milk powder, which has the most impact on what farmers are paid, increased 3.3 per cent to an average US$3691 (NZ$5200) a tonne, with gains across all contract periods. The average price is sitting 24 per cent higher than at the same time last year.

Fonterra has been reducing the amount of whole milk powder it offers on the auction platform, saying it has “extremely strong” contract demand and expectations for flat milk supply this season will limit its ability to increase production.

“Constant messages from New Zealand processors of tighter supply may have been heeded, along with tighter supply out of the European Union coming onto the radar of buyers also,” said NZX dairy analyst Stuart Davison. “GDT offer volumes are much lower than this time last year. Fonterra factors in fat and protein levels in milk when buying it off farmers.

“This auction will no doubt light a fire in the global dairy industry,” he said. “Buyers that missed out at this auction will be scrambling to secure prices and product.”

North Asian buyers purchased less whole milk powder than normal, although remained the largest buying group. They were closely followed by buyers from South East Asia. Buyers from the Middle East, Africa and the European Union all bought massive volumes of whole milk powder compared to their usual purchase volumes, Davison said.

Skim milk powder increased 7.3 per cent to an average US$3274/t, with lifts across all contract periods.

Butter prices rose 3.7 per cent, cheddar gained 3.6 per cent, anhydrous milk fat increased 3.1 per cent, lactose advanced 6.4 per cent, and buttermilk powder was up 3 per cent.