Global dairy prices rose again after holding steady at the month's first auction. The price index climbed 2.2 per cent at the latest auction, taking dairy prices to a seven-year high. Whole milk powder prices are up 25 per cent on the same time last year.

The world's biggest dairy auction is held in New Zealand twice a month. It is organised by the Fonterra Co-operative Group, and the world's big dairy companies take part. The latest international auction was held on Tuesday.

The average price at the auction reached $4,061 a tonne. A total of 177 traders and companies took part, of whom 117 won bids. Up to 31,815 tonnes of dairy products were offered and 27,836 tonnes sold. In 2014 demand for milk powder helped push prices to a record, and in 2017 a surge in butter demand lifted the market. This year, however, demand for most dairy products is rising, so prices are jumping.

The latest auction data show prices rose for every product. Whole milk powder (WMP) is the most influential product at the GDT auction and benefits farmers directly. According to the GDT price index, WMP rose 1.5 per cent from the previous auction to an average of $3,803 a tonne, 25 per cent higher than a year earlier. Skim milk powder (SMP) rose 2.5 per cent to $3,401 a tonne. Lactose rose 5.9 per cent to $1,258 a tonne. Butter rose 4.7 per cent to $5,111 a tonne, and cheddar sold at $4,426, 2.9 per cent more than at the previous auction.

Nathan Pany, senior agricultural economist at Westpac New Zealand, said global dairy prices are at a healthy level, 20 per cent above the five-year average.

ASB Bank economist Nate Kale said dairy production in New Zealand is falling this season, and this is the main driver of the price rise. Production may fall by 0.5 to 1 per cent from last season, and the continuing decline will push global prices further, he said.

The run of price falls at the global dairy auction broke in August. After eight straight auctions of declines, prices rose for the first time at the last auction of that month, though only slightly. At the first auction in September the index jumped 4 per cent from the previous auction, and at the first auction this month prices were stable. Meanwhile, Fonterra is sticking to its decision to reduce normal WMP volumes offered at the auction. The company said very strong demand this season and expectations of higher liquid milk supply are limiting its capacity to increase production.

Source: Bonik Barta. First published in Bengali on The Agro News.