New Zealand GlobalDairyTrade Price Index rises to its highest level since Oct. 20, 2015

New Zealand global dairy auction overnight showed that dairy prices were up strongly with the headline GDT index up an impressive 12.7 percent from the previous auction on August 2. The index is now at its highest level since Oct. 20, 2015.

The increase was led by an 18.9 percent surge in whole milk powder (WMP) prices to $US 2,695/tonne. Prices for other products on offer also rose, albeit more modestly. Prices were rising because farmers in New Zealand and abroad were scaling back production, stockpiles were reducing and demand was stronger. Fundamentals do appear to finally be shifting in favour of dairy producers.

Dairy prices have finally risen nearly 17 percent in four weeks, an encouraging sign for a sector. Federated Farmers said the significant rise at the auction would be a pick-me-up for farmers hit by low prices and bad weather. Prices need to hit about $US3000 a tonne for farmers to break even.

“We suspect the market is now factoring in a sizable decline in New Zealand milk production. This no doubt added to the massive 18.9 percent lift in whole-milk powder prices,” said Doug Steel, an economist at Bank of New Zealand.