Global dairy prices rose, ending a two-month falling streak, in an auction held early on Wednesday, supported by strong demand for milk powder from Asia and the Middle East.
The GDT Price Index climbed 2.7%, with an average selling price of $3,412 per tonne, at the fortnightly auction. The index had fallen 0.4% at the previous sale. Gains were led by a boost in prices for milk powders, with whole milk powder, the most widely traded item, gaining 3.6% and skim milk powder jumping 3.8%.
“Milk powder prices strengthened in response to stronger demand from south east Asian countries and (the) Middle East,” said Robert Gibson, dairy analyst at NZX.
Global milk supply was expected to remain relatively subdued throughout the rest of the year, pointing to further price gains, especially if demand held up in China, according to analysts.
“One crucial development we will be keeping a close eye on is how Chinese demand evolves in the coming months,” said Anne Boniface, senior economist at Westpac Bank. “Demand for dairy products in China seems to be holding up well, despite growing headwinds for the Chinese economy and trade tensions.”
A total of 25,000 tonnes was sold at the latest auction, an increase of 1.2% from the previous one, the auction platform said on its website.
The auction results can affect the New Zealand dollar as the dairy sector generates more than 7% of the nation’s gross domestic product.
However the kiwi currency was trading down 0.3% at around $0.6695 on Wednesday morning, in response to a stronger U.S. dollar.
GDT Events is owned by New Zealand’s Fonterra Co-operative Group Ltd, but operates independently from the dairy giant.
The New Zealand milk co-operative, which is owned by about 10,500 farmers, controls nearly a third of the world dairy trade.
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 Aug. 6.