By Tracy Withers

Milk powder auction prices rose for the first time in three months, Fonterra Cooperative Group Ltd., the world’s largest dairy exporter, stated.

Whole milk powder for May delivery rose 2.8 percent to $3,291 a metric ton, according to data on the Auckland-based company’s GlobalDairyTrade Web site. Prices fell in the January and February auctions, having reached a 16-month high in December. They remain 56 percent higher than a year earlier.

Fonterra accounts for about 40 percent of the global trade in butter, milk powder and cheese and in November raised the price it expects to pay New Zealand farmers for milk by 12 percent, citing a recovery in international demand. Powder prices rose as supply from European and U.S. producers starts to increase.

“The European Union is heading toward its peak production period now. and the euro has slipped against the U.S. dollar making that product cheaper,” GlobalDairyTrade Manager Paul Grave said in an interview. “Against that, Australian production is down due to the drought and New Zealand is very quickly drawing to the end of its dairy season.”

The euro fell 2.1 percent the past month and fell to $1.3436 yesterday, the lowest since May.

Fonterra is waiting to gauge whether a global economic recovery starts to stoke consumer demand that may lift prices further, said Grave. Demand signals are relatively positive at the moment, he said.

“Anyone involved in agribusiness will see it as really positive that the prices continue to trade in a more stable fashion and in a price range which is in the zone where farmers can be profitable,” he said.

Fonterra’s Internet-based auctions offer a one-month contract with delivery starting two months after the sale, and two three-month contracts with delivery starting three and six months later.

Milk powder for delivery from June through August rose 0.9 percent to $3,337 a ton, Fonterra said. Powder for shipment from September through November dropped 2.5 percent to $3,204 a ton.

Average prices across all contracts increased 0.8 percent to $3,281.

The decline in the six-month contract for a third successive auction is a sign that buyers are taking a wait-and- see approach to what happens later in the year, said Grave.

“Buyers are concerned to ensure they have their short- medium term position secure,” he said. “There’s still plenty of opportunity to buy in that later time period. If you are risk averse you can wait.” 3-03-10

Source: Bloomberg News (New Zealand)

http://www.bloomberg.com/apps/news?pid=20601081&sid=aock9osrkLUs#