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Whole Milk Powder Prices Rise to Five Month High at Auction

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Oct. 2 (Bloomberg) -- Whole milk powder prices rose to the highest in 5 1/2 months, adding to signs that Fonterra Cooperative Group Ltd. can achieve its increased forecast payment to New Zealand farmers.

Powder for delivery across all contracts through April rose 2.3 percent, according to a trade-weighted index posted on Fonterra’s GlobalDairyTrade website. The average winning price was $5,208 a metric ton, the highest since April 16.

Fonterra, the world’s biggest dairy exporter, last month raised its forecast payment to New Zealand farmers for a third time, citing the outlook for global prices. Whole milk auction prices have surged 65 percent since the start of the year.

While high prices are good for farmers, they may hurt the dairy industry by turning customers to substitutes like soy oil, Fonterra Chief Executive Officer Theo Spierings said in a Sept. 25 interview. Demand is slowing in some regions like Africa “but China is so strong in buying whole milk powder, because there are issues of foot and mouth disease in the Chinese herd,” he said.

New Zealand milk production is forecast to increase 5 percent in the 2013-14 season, the company said Sept. 6. Still, the global market continues to be in a supply constrained position, it said. Fonterra has reduced the volume it will offer at the auction because of demand from customers for products not offered at those sales, it said last month.

Fonterra, which accounts for about a third of the global trade in dairy products, sells whole, skim and butter-milk powder, dried-milk fat, lactose, butter, cheese and casein at its GlobalDairyTrade auctions. Casein is a protein found in milk. Prices across all products gained 2.4 percent.

To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net

To contact the editor responsible for this story: Matthew Brockett at mbrockett1@bloomberg.net