Dairy prices improve slightly at the latest GDT auction in New Zealand

International Global dairy prices improved slightly at the GlobalDairyTrade (GDT) price auction, held Wednesday in New Zealand, largely driven by rise in whole-milk powder prices. The recovery in dairy prices came after last month’s decline in the GDT index which occurred after a sharp spike higher over August and September.

New Zealand’s GDT index gained 1.4 percent early this month since the last sale previous month. Wholemilk powder prices, which have the greatest bearing on Fonterra's farmgate milk price, gained by 2.9 percent to USD2760 a tonne. Today's gain partly offsets the previous sale's 3.0 percent decline in the GDT index.

Further, among the reference products of Fonterra, skim milk powder fell by 0.3 percent to an average price of USD2,204 a tonne, butter milk powder firmed by 0.2 percent to USD2,583 a tonne, while butter rose by 2.6 percent to USD3,984/tonne and anhydrous milk fat gained by 1.1 percent to USD5,007/tonne.

In addition, other products witnessed a mixed reaction; cheddar dropped by 3.7 percent to USD3290/tonne and rennet casein fell by 4.5 percent to USD6,286 a tonne while lactose firmed by 5.6 percent to USD780 a tonne.

Meanwhile, Fonterra last month raised its farm gate milk price forecasts by 50 cents to USD5.25/kg of milk solids. Moreover, combined with the forecast earnings per share range for the 2017 financial year of 50 to 60 cents, the total payout available to farmers in the current season is forecast to be USD5.75 to USD5.85, before retentions.

Following this release, the New Zealand 10-year bond yields rose 1 basis point to 2.645 percent, the yield on 7-year note ended 1/2 basis point higher at 2.308 percent and the yield on short-term 2-year note remained steady at 1.980 percent. Also, benchmark S&P/NZX50 Index closed up 3.45 points to 6,976.54.