Dairy prices up 3.6% overnight

 The rise was across the board although whole milk powder rose by a modest 1.6%.

Key results were: AMF index up 6.8%, average price US$4,493/MT; Butter index up 13.2%, average price US$3,558/MT; BMP index up 10.5%, average price US$2,736/MT; Cheddar index up 3.2%, average price US$3,090/MT; LAC not offered; RenCas index up 4.2%, average price US$7,911/MT; SMP index up 2.8%, average price US$2,386/MT; SWP 2.8% average price US$2386; WMP index up 1.6%, average price US$2,307/MT

The ASB is maintaining its 2014/15 milk price forecast at $4.70/kgMS as its expectation that dairy prices will rise over 2015 is built into that forecast, says rural economist Nathan Penny.

Milk fat prices (AMF and butter) continue to stand out on the back of their exposure to the relatively healthy US dairy market, says Penny. Butter and AMF posted gains of 13.2% and 6.8% respectively, while BMP also rose over 10%.

Cheddar and casein posted gains roughly in line with the lift in overall prices.

"Overall prices kicked off 2015 46.1% lower than where they started 2014. WMP and SMP prices both sit over 50% lower than a year ago," says Penny.

"Looking by contract, most of the strength came in the near-dated contracts with WMP contracts for delivery between 1 and 3 months' time all rising compared to the previous auction. At the same time, prices for later-dated contracts remain modestly higher than near-dated ones.

"A decrease in overall auction volumes at this auction compared to the auction prior may explain some of the 3.6% overall price rise. While auction volumes are normally declining at this point of the season, Fonterra continues to rein in auction volumes faster than this would normally dictate."