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Source: ONE News
The average price for whole milk power has surged 25% on Fonterra's online auction.
In the August auction carried out overnight on Tuesday, whole milk powder fetched an average price of $US2,301 a tonne, $US472 more than in July.
Auction prices ranged from $US2,235 a tonne to $US2,530 a tonne.
This month, 1,000 tonnes of whole milk powder from Fonterra's operations in Australia were included in the auction for the first time. This is part of the co-operative's plans to expand the range of products sold in the auction.
Fonterra spokesperson Nigel Kuzemko says the improved pricing reflects a recent firming in market sentiment.
However, he says the international dairy market remains volatile as supply and demand goes through a rebalancing phase.
The next auction is set for September 1.
Dairy difficulties
Fonterra last week confirmed it still expects to pay farmers 12% less this season than their milk fetched last season.
It said continued falls in commodity markets meant it would have lowered the forecast by 10c/kg milk solids, if it had not been for a similar-sized gain in its added-value markets for branded consumer products and speciality ingredients.
According to the ANZ Bank, commodity prices have slumped 10% in the past six months in New Zealand dollar terms even as prices rose 2.8% on world markets.
The exchange rate for the New Zealand dollar against the US dollar has surged 32% in the past six months, reducing the amounts exporters receive in New Zealand dollar terms.
Prices for butter, cheese and milk powder, which make up a fifth of all exports, have fallen 17% in New Zealand dollar terms in the past six months.
Finance Minister Bill English said last week chances of an export-led recovery from the nation's worst recession in three decades were being hampered by the rising exchange rate.
On Tuesday, the Kiwi reached a high of 66.86 US cents, before dropping back to 66.77 cents at 5pm.
In Washington, where the US Department of Agriculture (USDA) is expected to spend $US8.8 billion on farm subsidies, payments to American dairy farmers have been lifted by $US243 million ($NZ369 million).
Federated Farmers said on Tuesday that the American taxpayer is paying up to $US2,020 per tonne to buy skim milk powder (SMP), which is up $US300 on previous support levels and $US2,880 per tonne for block cheddar cheese, up $US400.
"American dairy farmers cannot moan about export prices when US Government is buying some 68,000 tonnes of skim milk powder and 34,000 tonnes of cheese," the lobby said.
In addition, the USDA had given almost 91,000 tonnes of surplus skim milk powder to schools, food banks and other public programmes.
Last month's Fonterra auction priced the WMP that New Zealand predominantly exports at $US$1,829/tonne.
Federated Farmers said there was "an outside risk" that the new US subsidies might indirectly affect WMP prices, as there was a linkage between the prices paid for SMP and WMP.
