Dairy commodity prices increased by 0.6% at Fonterra’s latest auction, to a weighted average of $4,968/t. Volumes continue to fall way behind last year, with just 15,019t going under the hammer, compared to 32,122t at the same sale last year.

Butter prices were particularly firm, rising by 6.8% on the previous sale, with cheddar rising by 3.4% and whole milk powder by 2.4%. However, skimmed milk powder weakened for the first time since January, falling by 3.2% to $4,757.

Drought was continuing to limit milk production in both New Zealand and Australia, and was likely to curb yields for the final four months of the milk year, said a report by DairyCo. This was limiting export supplies, which, combined with strong Chinese demand, had helped to boost prices, it added.

In the northern hemisphere, milk production across Europe was behind last year due to the late spring. Production from April 2012 to January 2013 in France was down by 1.9%, with Italy down 2.9%, Netherlands by 0.6%, and the UK running 3.1% behind the previous year. US supplies were up by just 0.6%.

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