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Global price rise offers hope for New Zealand dairy industry

Xinhua, August 19, 2015 Adjust font size:

New Zealand's beleaguered dairy farmers had a glimmer of relief on Wednesday as dairy prices rose for the first time in almost six months.

Dairy prices were up an average 14.8 percent in the fortnightly Fonterra-run GlobalDairyTrade (GDT) auction, ending run of losses that began in March.

The benchmark whole milk powder price was up by 19.1 percent, to 1,856 U.S. dollars a tonne, while the overall average price for dairy commodities was 1,974 U.S. dollars a tonne.

Fonterra, the world's largest dairy exporter, said last week it would be cutting the amount of whole milk powder sold in the auction by about a third in the coming year, while rejecting calls for it to suspend the GDT while markets absorbed a global glut of dairy products.

The New Zealand Federated Farmers industry group welcomed the auction result, but cautioned those in the dairy industry to keep a tight rein on their spending.

"The outcome of this morning's auction suggests there might be light at the end of the tunnel, but what the industry needs is for this to continue and hold," Federated Farmers dairy industry chair Andrew Hoggard said in a statement.

Earlier this month, Fonterra cut its forecast payout to farmers from 5.25 NZ dollars (3.45 U.S. dollars) a kilogram of milk solids to 3.85 NZ dollars (2.53 U.S. dollars) -- a move that analysts estimated would cost the national economy about 3.3 billion NZ dollars (2.17 billion U.S. dollars).

The opposition New Zealand First party said the rise in the GDT auction prices was a "morale booster" for farmers, but it was inevitable given how far prices had fallen.

"Fonterra's move, finally, to drop its volume for sale on the latest auction by 20.7 percent was one reason for the price rise," New Zealand First leader Winston Peters said in a statement.

"Other factors included falling production from New Zealand, the real and scary prospect of a major El Nino drought and stored products reaching end of life."

Since the 2015-2016 dairy season began on June 1, the GDT price for whole milk powder was still down 18.3 percent.

"Prices for whole milk powder are basically back to where they were on July 15, but going back to the beginning of the 2014-2015 season, prices are down an incredible 60.8 percent," said Peters. Endi