Supply shortage expected to lift dairy payout
Economists are tipping a lift in dairy payout after a 10.4 per cent surge in the average price on Fonterra’s latest Global Dairy Trade auction, as producthungry international buyers reacted to a shrinking world dairy supply.
The BNZ and Westpac predic- ted Fonterra’s payout forecast for the 2012-2013 season would get a nudge up from the auction result, which saw the average price of wholemilk powder break through the US$4000 (NZ$4800) barrier for the first time since March 2011.
BNZ economist Doug Steel said the big jump in average price recently was driven by drought in New Zealand, shrinking milk production in Australia and robust world demand for protein. Product volumes offered were 14 per cent down on predictions. A record number of overnight bidders went away unsat- isfied, Mr Steel said.
He expected GDT prices to warm a littler as these conditions continued, and payout prospects to follow, but cautioned against too much optimism because rain would eventually arrive in the North Island and the northern hemi- sphere dairy season would get under way in a a few months.
BNZ market strategist Mike Jones said 10.4 per cent price increase was a ’’stunning result, much better than expected and as a result the NZ dollar has appreciated, but it hasn’t been a massive increase’’.