Although milk production forecasts have increased, the global dairy market continues to be in a supply constrained position.
Whole milk powder prices rose for the second time in three auctions to remain near four-month highs, adding to signs that Fonterra Cooperative Group Ltd. can achieve its increased forecast payment to New Zealand farmers.
Powder for delivery across all contracts through March rose 1.1 percent, according to a trade-weighted index posted on Fonterra’s GlobalDairyTrade website. The average winning price was $5,096 a metric ton. Prices rose to $5,124 on Aug. 20.
Fonterra, the world’s biggest dairy exporter, last month twice raised its forecast payment to New Zealand farmers for the year through May 2014, citing the outlook for global prices Whole milk auction prices have surged 62 percent since the start of the year.
New Zealand milk production is forecast to increase 5 percent in the 2013-14 season, the company said Sept. 6. Still, the global market continues to be in a supply constrained position, it said. Fonterra has reduced the volume it will offer at the auction because of demand from customers for products not offered at those sales, it said this month.
Fonterra achieved record sales at two auctions in August, held in the weeks after it disclosed a contamination scare affecting a protein shipped to China and used in the manufacture of baby formula. New Zealand officials said Aug. 28 that their testing showed the contamination didn’t pose food safety risks.
Fonterra, which accounts for about a third of the global trade in dairy products, sells whole, skim and butter-milk powder, dried-milk fat, lactose, butter, cheese and casein at its GlobalDairyTrade auctions. Casein is a protein found in milk. Prices across all products gained 0.3 percent.