January 7, 2020 / 9:09 PM / 14 days ago

UPDATE 1-Global dairy prices jump due to weak supply

(Re-casts, adds analyst comments)

WELLINGTON, Jan 8 (Reuters) - Global dairy prices jumped at the first auction of the year on Wednesday as low supply supported a surge across all products.

The GDT Price Index climbed 2.8 percent, with an average selling price of $3,371 per tonne, paring the 5.1% drop at the previous sale last month.

Prices gains were broad-based across products, jumping 1.7% for whole milk powder, the top traded item, and 5.4% for skim milk powder.

“This was underpinned by price increases for all dairy commodities, with smaller overall supply volumes available compared with the previous event, which is typical for this time of year but is likely to have contributed to the uptick in demand,” said Robert Gibson, analyst at NZX.

A total of 33,050 tonnes was sold at the latest auction, down 7.5 percent from the previous one, the auction platform said on its website.

Analysts said that prices would likely be supported in the early months of 2020 by constrained supply in New Zealand, the world’s largest dairy exporter.

“NZ dairy production volume this season is likely to be slightly below the previous one, given the cooler-than-normal spring, and more recently, soil moisture deficits in some regions,” said Imre Speizer, New Zealand market strategist at Westpac Bank.

The auction results can affect the New Zealand dollar as the dairy sector generates more than 7 percent of the nation’s gross domestic product.

However, the rosy auction result took a backseat to caution over growing global risks and the kiwi currency fell 0.5% to trade at an almost two-week low $0.6636 on Wednesday morning.

GDT Events is owned by New Zealand’s Fonterra Co-operative Group Ltd, but operates independently from the dairy giant.

The New Zealand milk co-operative, which is owned by about 10,500 farmers, controls nearly a third of the world dairy trade.

U.S.-listed CRA International Inc is the trading manager for the twice-monthly Global Dairy Trade auction. The auctions are held twice a month, with the next one scheduled for Jan. 21.

Reporting by Charlotte Greenfield; Editing by Dan Grebler

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