Market Report: Bright prospects for further milk price increases

Milk prices should increase sharply this summer, according to consultants, the Dairy Group, which has recorded a further rise in its Market Price Equivalent benchmark, to 26.69p/litre. That is 2.35p/litre up on the year, but 0.96 p/litre below October 2009.

Commodity prices continued to rise due to weak European production and lower southern hemisphere stocks, with liquid returns buoyed by improving cream and butter values, said director Nick Holt-Martyn. “The prognosis for the next six months, in the absence of a sell-off from intervention, is continued price improvements. Our milk price forecast suggests there could be as much as 2p/litre to be passed on during the summer.”

Although milk powder prices fell by 1% at Fonterra’s latest auction, Anhydrous Milk Fat values rose by 4%, DairyCo‘s latest Datum report showed. Whole milk powder averaged $3,932/t , with skimmed milk powder at $3,612/t and AMF at $5,020/t. “However, the average price of WMP for delivery between November 2010 and January 2011 rose by 3.5%, suggesting there is still long-term uncertainty over supplies.”