December 4, 2018 / 10:05 PM / 9 months ago

UPDATE 1-Global dairy prices gain for first time in six months

* Dairy prices rise 2.2 pct at fortnightly auction

* First rise since May

* Could prove to be temporary as NZ supply ramps up - analyst (Re-casts, adds analyst comment, market reaction)

By Charlotte Greenfield

WELLINGTON, Dec 5 (Reuters) - Global dairy prices rose for the first time in six months at a fortnightly auction held early on Wednesday as lower volumes of key products were offered at the sale.

The GDT Price Index climbed 2.2 percent, the first rise since May, to an average selling price of $2,819 per tonne.

The index had fallen 3.5 pct at the previous sale.

Prices have been falling on ramped up supply from New Zealand, the world’s top dairy exporter, but lower volumes offered by dairy giant Fonterra had supported prices at the latest auction, according to analysts.

Prices for whole milk powder, the most heavily traded item, rose 2.5 percent.

A total of 36,450 tonnes was sold falling 15.2 percent from the previous one, the auction platform said on its website.

The price rally could prove to be temporary as New Zealand dairy supply ramped up and good weather conditions were expected to support production over the coming summer months.

“On this basis, we look through the result overnight and expect that dairy prices are on the whole likely to remain soft over the next few months,” said Nathan Penny, senior rural economist at ASB 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 kiwi began to ease off its six-month high of $0.6969 in the hours before the auction, as trade concerns dominated the currency’s trajectory. The auction results could not stop its losses and the currency was trading around $0.6931 by Wednesday morning.

GDT Events is owned by New Zealand’s Fonterra 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.

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

The auctions are held twice a month, with the next one scheduled for December 18. (Reporting by Charlotte Greenfield)

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