Global dairy prices rise for third auction in a row

WELLINGTON (Reuters): Global dairy prices rose for the third time in a row at an international auction on Wednesday, bolstering hope that last year’s recovery is back on track.

The GDT Price Index climbed 3.1%, with an average selling price of $3,139 per ton, in the auction held in the early hours of Wednesday morning. The index had risen 1.6% at the previous sale.

Farmers and analysts had been concerned that after two years of declining prices, a 50% rebound during 2016 could be temporary since prices were dented at the beginning of the new year as global supply increased.

But heavy flooding in New Zealand, the world’s largest dairy exporter, was pointing to tighter supply.

“The recent very poor weather has raised concerns about production in the near term, and this is likely to have given prices a lift,” said Satish Ranchhod, Senior Economist at Westpac Bank.

“Although prices remain lower than the levels that we saw in early 2017, they appear to have found a floor,” he added.

Prices for whole milk powder rose 3.5%, while skim milk powder fell 7.1%.

A total of 22,927 tons was sold at the latest auction, an increase of 1.3% from the previous one, the auction platform said.

The auction results can affect the New Zealand dollar as the dairy sector generates around 7% of the nation’s gross domestic product.

The Kiwi rose 0.4% to a more than two-week high of $0.7046 after the auction.

GDT Events is owned by New Zealand’s Fonterra Co-operative Group Ltd., but operates independently from the dairy giant. U.S.-listed CRA International Inc is the trading manager for the twice-monthly Global Dairy Trade auction. The auctions are held twice a month, with the next one scheduled for May 2.