As had been anticipated, dairy products prices on the Global Dairy Trade (GDT) auction rebounded sharply at this week’s event. The overall index jumped 9.4% to $3,042 per tonne, mainly on the back of a 19.2% jump in the price of whole milk powder (WMP) to $2,874 per tonne.

The fortnightly GDT auction of dairy products is organised on behalf of New Zealand’s Fonterra and is a key barometer of dairy commodity prices.

Butter continued its recent strong run, with price rising by 6.1% to $3,783 per tonne. Skim milk powder was up 6.7% to $2,598 per tonne.

ADVERTISEMENT

Today's auction price rise had been expected after last week’s announcement from Fonterra that New Zealand milk output in the 2014/2015 season was expected to be 3% lower than the previous season. The company has also lowered the volumes of product being offered on the auction in the hope of driving prices higher. Weaker demand from major customers in China in the second half of 2014 was a key factor in the auction price collapse.

It was the fourth consecutive price rise at the auction. It is also notable that the average auction price exceeded the $3,000 per tonne mark for the first time since August. The timing of the price recovery will be welcomed by Irish farmers, as it may allow Irish farmers to escape the worst impact of the market dip. The overall index is now 16% higher than its low point last November. However, it remains 41% below the peak achieved last February.

Exchange rates have also moved in Europe's favour, with the weaker euro making products from this part of the world more competitive on global markets.

IFA dairy committee chairman Sean O’Leary said that today’s GDT auction proved that the global dairy market recovery was now under way. He said this was further evidence that the doomsayers talking down markets and prices late last year were wide of the mark.

"GDT returns now exceed that for EU products, and this is bound to lift EU prices further in coming weeks," he said. "This should be taken on board by our milk purchasing co-ops, as a signal that they can comfortably afford to hold milk prices for January and February at least."