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UPDATE 1-Milk prices in surprise rise despite supply jump
March 21, 2017 / 8:06 PM / 9 months ago

UPDATE 1-Milk prices in surprise rise despite supply jump

 (Adds NZD reaction, analyst quote and context)
    WELLINGTON, March 22 (Reuters) - Global dairy prices
unexpectedly rose at an international auction on Wednesday, even
while volumes increased, raising prospects that last year's
recovery in milk prices is back on track.
    Farmers and analysts had been concerned that a 50 percent
rebound in prices during 2016, after two years of falls, could
be temporary since prices were dented at the two previous
    But average prices rose for the first time in six weeks,
adding 1.7 percent to $3,101 per tonne in the Global Dairy Trade
auction held by GDT Events overnight.
    The rebound comes against futures market expectations for a
drop and despite a 0.8 percent overall increase in supply.
    The auction results can affect the New Zealand dollar
         as the dairy sector generates more than 7 percent of
the nation's gross domestic product. The surprise result sent
the kiwi up nearly 0.5 percent to $0.7089, though it has since
eased to trade around $0.7046 as risk-off traders bought yen.
    "There has been a lot of negative sentiment in the market
recently so this result marks a real turnaround in attitude,"
AgriHQ dairy analyst Susan Kilsby said in a note emailed after
the auction.
    "For the market to absorb the extra volume available and to
pay a higher price for it is an outstanding result and a
complete turnaround from a fortnight ago."
    Then, an unexpected sharp fall worried farmers in New
Zealand, stoking fears they could receive lower payments from
dairy giant Fonterra          next season than the NZ$6 ($4.18)
per kg forecast earlier.
    On Wednesday prices for whole milk powder, the main
determinant for farmers' payout, rose 2.9 percent, despite
supply surging nearly 10 percent and futures markets pricing in
a fall of 6 percent. Milk fat and butter prices also rose.
    Cheddar prices slipped, and skim milk powder prices dropped
10.1 percent as growing stockpiles of those products in Europe
held values down.    
    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.
    A total of 22,498 tonnes was sold, an increase of 0.8
percent from the previous auction, the auction platform said on
its website. 
   The auctions are held twice a month, with the next one
scheduled for April 4. Fonterra is also due to report its
half-year results on Wednesday.

 (Reporting by Tom Westbrook)

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