Market report: Dairy commodities rise at auction but fail to catch up with spring levels

Dairy commodity prices rebounded at Fonterra’s latest auction, after four months of sliding markets.

Whole milk powder values surged by 25% for November contracts, and rose by 19% for all contract periods through to May 2011. Skimmed milk powder prices jumped by 16%, with the weighted average for all products up by 17%.

Paul Grave, globalDairyTrade manager, said the result indicated a firmer tone had returned to the market. However, with a weighted average of US$3562/t, (£2308/t) prices were still 11% below their April peak.

From 15 September, globalDairyTrade, which is Fronterra’s internet-based electronic trading platform, would hold its dairy auction every two weeks. “Having two events a month will provide a lot more visibility when it comes to assessing the market direction.”

Nick-Holt Martyn, director of The Dairy Group, said the fortnightly auctions would result in more fluid prices, with less dramatic volatility. But despite the generally better global markets, UK milk prices had slipped down the EU league table to 17th place, with the gap between market returns and farm prices widening to 3p/litre, he added.