Milk price rise brings minor drop

There’s another touch of bad news for Kiwi dairy farmers, with whole milk powder (WMP) prices taking another minor knock at auction overnight on Tuesday.

However, Westpac analyst Sarah Drought said the auction had been in line with expectations and left the bank ‘‘comfortable’’ with its forecast of a $6.20 farmgate milk price this season.

Overall prices rose 0.6 per cent to 3517 per metric tonne at the Global-Dairy-Trade auction.

But WMP, New Zealand’s main export, fell back 0.1 per cent to US$3282.

However, it’s a minor drop compared with the 7.7 per cent slump in WMP prices a fortnight ago, which contributed to an overall 3.9 per cent index drop.

WMP prices have been forecast to reach US$4000/MT this year, with New Zealand production to decline.

Drought said Chinese buyers had climbed back into the market over the past couple of auctions, after falling away slightly through December.

She said there was likely to be some moderation in prices in the months ahead as farmers responded to higher prices.

‘‘Locally, we don’t expect the season’s milk collection to contract as much as the 7 per cent Fonterra is forecasting,’’ Drought said.

‘‘Domestic conditions have improved after a very wet spring, which bodes well for production through the back half of the season. That said, rapidly drying conditions in some parts of New Zealand adds risk to this.’’

The overall price increase was held back by a 10.1 per cent drop in butter milk powder prices, while lactose and skim milk powder prices also fell.

There were 178 participating bidders, with a total of 22,030 metric tonnes of product sold.