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The gamble to drop 1000MT of whole milk powder (WMP) out of last night’s Global Dairy Trade auction has paid off for dairy giant Fonterra.

Prices across the board rose 2.0 per cent, led by a 3.7 per cent gain in WMP, which averaged US$3733/MT.

However, despite the lift, the product is sitting more than US$1000 below its March peak of US$4757/MT.

Skim milk powder (SMP) – Fonterra’s second-biggest reference product – dipped 0.7 per cent to an average US$3547/MT.

Anhydrous milk fat (AMF) – which leapt 13.9 per cent at the previous event – gained a further 4.0 per cent, with an average of US$5901/MT.

The gap in fats widened with butter – which commanded US$7086/MT in March – slipping 0.2 per cent to an average US$5356/MT.

Cheddar continued its relatively steady progress, with a 2.1 per cent lift to an average US$5147/MT.

Butter milk powder, lactose and sweet whey powder were not offered at this event.

26,106 MT of product was purchased by 113 successful bidders.

Fonterra will release its annual financial results and confirm the final 2021/22 payout tomorrow morning.

NZX Dairy Insights Manager Stu Davison said the positive showing by WMP, AMF and cheddar came as no surprise, given the low prices the products had been sitting on, over the past few months.

Davison said demand in key markets remains “firm”, but he wouldn’t go as far as saying it is “solid”.

The removal of 1000MT of WMP “surely helped to encourage the buy side of the market to be a little more active,” Davison said.

Mike Cronin, Managing Director of Co-operative Affairs at Fonterra said the positive result was welcome news at this time of the year.

“We’ve got to remind ourselves it’s the second month of the new financial year and this early in the season … it’s good to see some of these trends,” he told The Country’s Jamie Mackay.

The result also supplemented the co-op’s earnings update released earlier this week, Cronin said.

Demand from China wasn’t as high as the market would like, but had “increased a little bit,” which was promising, Cronin said.

“We’re hearing there may be a bit of replenishing of stocks needed, so [there] may be some positive future trends there.”

The weather was affecting supply, with New Zealand “still pretty wet” and Europe hampered by heat waves – as well as regulations, he said.

We’re not going to see a whole lot of milk come onto the market”.

Cronin wasn’t concerned by a dip in SMP, putting the result down to the “dynamics of us versus the EU at the moment”.

“We’ve got a bit of room for our skim milk to come up again to meet those global prices.”

Overall Fonterra remained upbeat about the result, despite WMP dropping US$1000/MT below its March peak, Cronin said.

“We’ve still seen across the entire season how that’s going to look, and it’s obviously supportive of our current milk price, which is still pretty healthy.

“When you see some of the signs about where the demand’s going to come [from]… I think there’s probably plenty of room to remain pretty optimistic for the whole season.”

Source : NZ herald 21st Sep 2022