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New Zealand Production Drop Causes Dairy Prices to Rise

Brian German Agri-Business, Dairy & Livestock

Dairy prices in the international market saw the steepest increase since May as New Zealand experiences dry weather conditions, causing a decline in production.  New Zealand serves as the world’s largest dairy exporter.

dairy pricesDuring the first auction of 2018, the Global Dairy Trade Price Index (GDT) gained 2.2 percent.  This comes after the milk co-operative Fonterra, the world’s largest dairy processor, lowered the forecast for New Zealand milk production a week ago.  This was the second time in two months the forecast was reduced.

The average selling price was measured at $3,124 per ton.  The most widely traded product, whole milk powder, saw the largest gain in prices at an increase of 4.2 percent.  Skim milk powder prices also rose 1.6 percent, and butter prices increased for the first time since October.

At the previous sale, the GDT index fell by 3.9 percent to a 15-month low.  according to GDT Events, the index also declined in five of the last six auctions.  The auction platform noted on their website that a total of 25,400 tons were sold at the latest auction, which is 14.2 percent less than the previous one.

Dry weather persists throughout New Zealand’s dairy regions and is causing a decline in pasture growth, subsequently lowering milk production and creating an increase in dairy prices.  Fonterra announced that the dry weather is expected to continue, and cut its collection forecast for the 2017-2018 season by nearly 3 percent. The co-operative controls close to a third of the world dairy traded and is owned by approximately 10,500 farmers.