Milk Powder Surges Most in 2 1/2 Years on New Zealand Drought

Whole-milk powder auction prices climbed the most in 2 1/2 years, Fonterra Cooperative Group Ltd. said.

Powder for May delivery rose 19.3 percent, the most since Sept. 1, 2010, according to a trade-weighted index on the company’s GlobalDairyTrade website. The near-term contract for New Zealand product rose to $4,343 a metric ton, the highest price since March 1, 2011. The New Zealand dollar rose as high as 83.33 U.S. cents from 82.77 cents yesterday.

Auckland-based Fonterra, the world’s biggest dairy exporter, last week reaffirmed its forecast payment to farmers, saying it expects higher global dairy prices in the first half of 2013. Prices have gained 36 percent this year as dry conditions in parts of New Zealand curb milk collection.

“The auction result is certainly positive, but it needs to be seen in the context of lower volumes thanks to the worsening New Zealand drought,” said Mike Jones, currency strategist at Bank of New Zealand, in a note to clients.

New Zealand’s government last week declared a drought in Northland, at the top of the North Island, and said that other regions may follow. Farmers who produce about 46 percent of New Zealand’s milk are experiencing extreme dry conditions, according to ANZ Bank New Zealand Ltd. estimates.

Fonterra, which accounts for about 40 percent 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. The company offers monthly contracts with delivery starting from two months after the sale. Casein is a protein found in milk.

Whole-milk powder for June delivery rose 17.3% while prices across all five product contracts out to September rose 18 percent, Fonterra said.

In other auctions, prices for May delivery of milk fat, butter, casein, cheddar, milk protein concentrate, skim and butter-milk powder also increased. Lactose wasn’t offered.

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