The latest Global Dairy Trade index shows a sharp rise in dairy prices, reversing months of declining auction values and providing an unexpected boost for farmers.
Farming stood out as an economic bright spot last year, but concerns grew that it had peaked after the trading index dropped nine times over five months, hastening its downturn.
Last year, Fonterra cut its farmgate milk price forecast from $9-$10 per kilogram of milk solids to $8.50-$9.50 per kg, mirroring weak global dairy prices amid strong milk production from New Zealand, Europe, and the United States.
But the latest auction brought a sharp turnaround, lifting dairy prices by 6.3%.
Cristina Alvarado, head of dairy insights at the New Zealand Exchange, said a price rise was anticipated, but the scale far exceeded expectations.
Whole milk powder prices increased by over 7%, skim milk 5.4 and butter 3.8.
The auction index had declined steadily, driven mainly by increased milk supply against steady or weakening demand. Yet the latest auction reversed course, as total volumes dropped while demand strengthened.
The sharpest change emerged in the Middle East, where buying activity doubled to claim one-fifth of total purchases.