Whole milk powder price up 13.7% at latest Fonterra auction (Update 1)

The average whole milk powder price at Fonterra's latest monthly internet auction rose 13.7% from October to US$3,437 per tonne overnight. The average price is now up 88% since its low of US$1,829 in July this year. (Update 1 includes Fonterra statement.) The last time the average internet auction milk powder price was this high was in August 2008 while the price was on its way down in just the second auction that had been run. The latest price is the fourth consecutive rise for the average price. The latest auction was the 17th run by Fonterra since July 2008 when the average price began at US$4,395. Here is the full release from Fonterra:

globalDairyTrade, Fonterra's internet-based sales platform, concluded its November trading event this morning (NZT) with the average price for Whole Milk Powder up 13.7%. The trading manager, CRA International, advised Fonterra that the average price achieved across all contracts for Whole Milk Powder (WMP) was US$3,437 per tonne FAS. This was US$415 per tonne higher than the October event. Prices ranged from US$3,270 per tonne FAS to US$3,715 per tonne FAS. Nigel Kuzemko, Director Commercial & Strategy, Fonterra Trade & Operations, said demand had been strengthening, along with pricing, in recent months and there was a more positive sentiment in the market. But the size of the lift in pricing this month showed customers demonstrating some urgency in refilling their supply chains. "This is a reflection of the prices that buyers are prepared to pay on the day to secure product in these contract periods. And we do have a tight supply situation for most products." However, Mr Kuzemko said the recovery in consumer demand and the economic situation were still relatively fragile. The recent move by the Dairy Management Committee of the European Commission to reduce the level of intervention in dairy markets was a positive step which would encourage market stabilisation. "It provides further confirmation of the improving market situation," Mr Kuzemko said. Anhydrous Milk Fat (AMF) was traded on globalDairyTrade for the first time. The average price achieved across all contracts was US$4,757 per tonne FAS. Mr Kuzemko said AMF's strong start confirmed a shortage of supply. More than NZ$1 billion of product has now been sold on the globalDairyTrade platform, which was launched in July 2008. The next globalDairyTrade trading event will be held on 1 December 2009.