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UPDATE 1-Dairy prices add to recovery; auction volumes stay low
September 1, 2015 / 9:47 PM / 2 years ago

UPDATE 1-Dairy prices add to recovery; auction volumes stay low

(Adds comment, details)
    WELLINGTON, Sept 2 (Reuters) - Global dairy prices rose to a
2-1/2-month high as tightening supplies in Tuesday's auction
prompted more buying, lifting prices further away from a
12-1/2-year low hit last month.
    The benchmark GlobalDairy Trade (GDT) price index climbed
10.9 percent at fortnightly auctions held on Tuesday by New
Zealand dairy exporter Fonterra, adding to its recovery
from its weakest level seen since November 2002 hit in August.
    Prices have started to perk up since Fonterra, the world's
largest dairy exporter, began reducing the amount of commodity
dairy products it offers at the auctions from late last month,
following a sharp drop in prices in the past year.
    "The lower volume of product on offer is lending support to
the market in the short term," analysts at agriculture
consultants AgriHQ said in a note.
    "But a reduction in global milk production must occur to
allow for a sustained recovery in dairy commodity prices."
    After rising steadily since 2008 to scale record highs in
2013, global dairy prices have eased as many buyers have stayed
out of the market for months because of slowing economic growth
in China and global oversupply of milk products.
    The total amount of milk powders, butter, cheese and other
commodity dairy products sold fell 2.3 percent from two weeks
ago, while average prices for all products rose 12.7 percent to
$2,226 per tonne, off a record low of $1,815 hit in August.
    Prices for whole milk powder, the most traded product at the
auction, rose 12.1 percent to $2,078 per tonne, bouncing further
off $1,590 touched last month, the lowest since the auctions
began in 2008.
    Prices for skim milk powder and anhydrous milk fat each rose
11.7 percent, while butter milk powder climbed 30 percent.
Prices for cheddar rose 4.7 percent.
    Gains seen at the latest auction suggest that global dairy
prices may stabilise after deep falls seen in past months
prompted Fonterra to slash its forecast farmgate price to a
10-year low and cut hundreds of jobs while tightening its
spending plans. 
    Global dairy prices have fallen sharply as slowing growth in
China, the Middle East and some emerging markets has cooled
demand for protein from their growing middle classes. Meanwhile,
Russian import sanctions and high milk production has ramped up
global supply.
    Weak dairy prices have slashed farmer incomes in New Zealand
and may pose wider risks to the economy of the world's largest
dairy exporting country.

 (Reporting by Naomi Tajitsu in Wellington and Bengaluru
Commodities desk; Editing by Lisa Shumaker)

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