Dairy market boosted by 15% rise in Fonterra auction

RENEWED firmness in the global dairy market was suggested by last week’s 15.7% price rebound in the Fonterra trade auction, after two successive monthly declines.

The recovery was attributed by some experts to rising grain prices, which are closely linked to global prices for dairy products.

Meanwhile, the severe earthquake in the Canterbury region of New Zealand, which accounts for around 12% of New Zealand’s milk production, had little effect on the dairy industry.

Milk collection continued despite damage to milking facilities and temporary processing shutdowns. The power supply to an estimated 20% of farms was interrupted.

Of greater significance was the collapse of, and receivership at, South Canterbury Finance, the lender behind a significant portion of the recent growth of the region’s dairy industry, which will pose major challenges for a number of dairy farms.

New Zealand farmers are on course for their second best milk price year ever, in 2010/11, with their July price (at Fonterra) equivalent to €29.32 for 100kg in the Dutch Dairy Board’s (DDB) rankings.

This compares with Glanbia’s €29.95, Kerry’s €29.84, and the average of €31.78 at the DDB’s ranking of 17 big EU milk buyers.

In May, these rankings had Glanbia paying the fourth best price and Kerry paying the sixth best price (standardised for milk of 4.2% fat, 3.4% protein, VAT-excluded for a 500,000kg per year delivery, of TBC 24,999 and SCC 249,999, collected every second day).

Continental EU milk prices follow a seasonal pattern, starting to increase in May, usually the month of highest milk production and lowest milk price, and reaching their peak in October or November.