Bloomberg News

Whole-Milk Powder Jumps Most in Seven Months on Demand

October 19, 2011

(Updates with comment in fourth paragraph.)

Oct. 19 (Bloomberg) -- Whole-milk powder prices climbed the most in more than seven months as strong demand from emerging markets outstripped an increase in global supplies.

Powder for December delivery jumped 6.4 percent to $3,473 a metric ton from $3,263 two weeks earlier, according to Fonterra Cooperative Group Ltd.’s GlobalDairyTrade auction. That was the most since March 1.

Dairy prices may be more resilient than other commodities to a slowdown in Western economies as most demand growth comes from emerging markets, Fonterra said last month. Whole-milk powder has slumped 30 percent since reaching a record $4,958 a ton in March as high prices spurred farmers to boost herds and production.

“Even with the supply coming, prices have still managed to push a little bit higher and that suggests demand is keeping pace, maybe even outpacing supply,” Doug Steel, an economist at Bank of New Zealand in Wellington, said by phone today. Buying likely came from emerging markets including China, as well as oil-producing nations, he said.

Global dairy prices may recover early next year on steady demand from Asia and a seasonal tightening of supply, Auckland- based Fonterra said Sept. 22. Output in New Zealand was 10 percent higher in July than a year earlier after a mild winter, NZX Agrifax said Oct. 7.

Global Demand

Demand for food commodities including dairy is rising in Asia, led by India and China, as economic growth lifts incomes and spurs increased sales of protein-rich meals. Global milk demand is likely to increase by about 160 billion liters over the next decade to more than 800 billion liters per year by 2020, Fonterra Chief Executive Officer Theo Spierings said Sept. 28. About 80 percent to 90 percent of that new demand may come from Asia and emerging markets, he said.

“The strong start to the New Zealand season is very well known by the market and that’s what makes this result all the more encouraging,” Steel said. “The balance of those demand and supply and risk factors suggest that the international dairy market has found some stability.”

Fonterra, which accounts for about 40 percent of the global trade in dairy products, sells whole and skim-milk powder, dried-milk fat and casein at its GlobalDairyTrade auctions. The company offers one-month contracts with delivery from two months after the sale, and two three-month contracts with delivery three and six months later. Casein is a protein found in milk.

Whole-milk powder for delivery from January to March increased 6.7 percent, Fonterra said. Powder for shipment from April to June gained 0.8 percent. Across all contracts, prices rose 5.7 percent, the highest increase since March 1.

In other auctions, prices for December delivery of cheddar, casein, milk-protein concentrate and butter-milk powder fell. Skim-milk powder rose 2.8 percent.

For Related and Information: On Fonterra: FCG NZ <Equity> CN <GO> On dairy trade: NI DAIRY <GO> Agriculture supply & demand: AGSD <GO> Top agriculture stories: YTOP <GO>

--With assistance from Chris Bourke in Wellington. Editors: Thomas Kutty Abraham, James Poole

To contact the reporter for this story: Phoebe Sedgman in Melbourne at psedgman2@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net


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