Global dairy price rebound gains momentum with another auction price rise

The Global Dairy Trade price index was up 4.2 per cent the auction on Tuesday, February 6, with solid gains across most commodities.

Butter led the way, up 10.3pc, while cheddar was up 6.3pc, skim milk powder 4.6pc and whole milk powder (WMP) 3.4pc.

Only mozzarella bucked the trend, down 1.8pc.

It was the fifth consecutive rise at the auction, as prices claw back big drops in August.

Westpac NZ chief economist Kelly Eckhold said the strong result surprised.

"This outcome was counter to our forecast for a consolidation in prices this time," he said.

"The futures market had pointed to a small WMP price fall at this auction."

Aggressive bidding from Chinese buyers - apparently driven by a desire to secure supply ahead of the Chinese New Year holiday period from February 10-17 - fueled the lift.

But Mr Eckhold warned the bank was still concerned about the strength of Chinese demand in the coming year.

"Chinese consumers still appeared cautious," he said.

"But forecasts of Chinese growth have stabilised in recent months as the authorities have increasingly provided support to the economy."

The rise in prices has prompted Westpac to revise up its forecast NZ farmgate milk price to $NZ7.90 a kilogram milk solids.

ANZ NZ agricultural economist Susan Kilsby said dairy prices were expected to continue to improve as global milk supplies eased.

Dairy prices were up 4.7pc in January on ANZ's commodity price index.

Butter and whole milk powder were the main drivers, improving by 9.9pc and 5.3pc respectively, Ms Kilsby said.

"Butter prices were lagging other dairy prices but as milk production slows in the northern hemisphere the butter market has started to tighten," she said.