January 21, 2020 / 10:49 PM / a month ago

UPDATE 1-Global dairy prices rise again in second auction of the year

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WELLINGTON, Jan 22 (Reuters) - Global dairy prices surged again in the second auction of 2020 on Wednesday, as prices increased across almost all products, with dry weather in the coming months seen as putting further upward pressure.

The GDT Price Index climbed 1.7%, with an average selling price of $3,434 per tonne, following on from a 2.8% surge in the previous auction earlier this month.

Prices gains were broad-based across products, jumping 2.4% for whole milk powder and 0.7% for skim milk powder, while butter prices rose strongly by 5.5%.

The result was likely due to a lift in demand from North Asia and the Middle East, said Robert Gibson, analyst at NZX.

A total of 33,165 tonnes was sold at the latest auction, the auction platform said on its website https://www.globaldairytrade.info.

Analysts said the dairy prices have now largely recovered ground lost at the end of 2019, and said drought risks could lend further support.

“Looking over February and March, emerging dry weather could put further upward pressure on prices,” ASB Bank Senior Rural Economist Nathan Penny said in a note.

“However, it’s still early days in the NZ summer and we maintain our 2019/20 production growth forecast at 0%. In other words, we are noting the drought risks at this stage,” he added.

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.

The positive dairy prices, however, took a back seat as concerns over the spread of a pneumonia-like virus in China weighed on Asian currencies, with the kiwi currency staying largely flat at $0.6596 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.

The auctions are held twice a month, with the next one scheduled for Feb. 4. (Reporting by Praveen Menon, Editing by Rosalba O’Brien)

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