August 20, 2019 / 10:07 PM / a month ago

Global dairy prices flat, milk powder surges at fortnightly auction

WELLINGTON (Reuters) - Global dairy prices were largely flat at an auction early on Wednesday, but key product whole milk powder posted surprisingly strong gains on increased demand from Asia.

The GDT Price Index edged down 0.2%, with an average selling price of $3,255 per tonne, having fallen 2.6% at the previous sale two weeks earlier.

Prices for whole milk powder, the most widely traded item, climbed 2.1%, beating futures markets expectations of a 2% fall.

“Prices largely (lifted) for delivery dates from October to January with improved demand from North Asia,” said Robert Gibson, dairy analyst at NZX, referring to whole milk powder.

Demand from China and the looming risks from a U.S.-China trade war would likely be the biggest factors determining the trajectory for prices throughout the rest of the year, despite lower New Zealand supply likely providing support.

“If demand for dairy in China falls sharply, even limited growth in supply wouldn’t be enough to stop prices tumbling,” Anne Boniface, senior economist at Westpac Bank, said in a research note.

A total of 34,410 tonnes was sold on Wednesday, falling 1.6 percent from the previous auction, the auction platform said on its website.

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 Kiwi currency rose to $0.6429 from $0.6400 in the hours after the auction, but later pared gains to trade around $0.6415.

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

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

U.S.-listed CRA International Inc is the trading manager.

A number of companies, including Dairy America and Murray Goulburn, use the platform to sell milk powder and other dairy products.

The next auction is scheduled for September 3.

Reporting by Charlotte Greenfield; Editing by Sonya Hepinstall

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