DAIRY prices were up 9.4 per cent at Fonterra's GlobalDairyTrade auction overnight, boosted by a big increase in the price of whole milk powder.
The average winning price was US$3042 per tonne, up from 20 per cent from its low of US$2513 in December but still down about 40 per cent in US dollar terms since February.
Prices have now increased at four consecutive auctions.
Whole milk powder jumped by 19.2 per cent after Fonterra said it would reduce the volume of product it sells at the auction for the remainder of the season.
Skim milk powder rose by 6.7 per cent, while rennet casein was up 7.7 per cent and butter prices increased by 6.1 per cent.
Cheddar had a big fall, down 11.1 per cent, with anhydrous milk fat down 5.4 per cent and butter milk powder edging down 0.4 per cent.
Volume was down as signalled by Fonterra, with the maximum supply falling by 10 per cent from the previous auction to 28,705 tonnes.
AgriHQ's Seasonal Farmgate Milk Price forecast for New Zealand farmers for the 2014-15 season has increased by 15c to $4.55 per kg of milk solids following the latest auction.
Fonterra's current forecast for New Zealand farmers for this season is $4.70/kg, down from a record $8.40/kg last season.
AgriHQ dairy analyst Susan Kilsby said Fonterra's announcement it would reduce supply at the auctions had boosted prices.
She said whole milk powder futures contracts gained 14 per cent on average in the past fortnight with most of this movement occurring after the Fonterra announcement.
"Fonterra's recent announcement regarding the tightening of supply triggered a change of market sentiment," she said.
"This brought about an expectation that prices would rise further, which renewed buyer interest despite most markets currently holding sufficient supplies to cover immediate demand."
However, Ms Kilsby cautioned that it will be difficult for the market to continue to increase at such as rapid rate.
"The sheer volume of milk available around the globe will curtail the amount that prices can continue to increase in the next six months," she said.
"Whole milk powder prices have greater potential to increase further as New Zealand is the world's largest supplier of this product, whereas the majority of the globally traded skim milk powder is sourced from the Northern Hemisphere."
