WELLINGTON (Reuters) - Global dairy prices climbed for the seventh time in a row at an auction held early on Wednesday, on the back of curbed supply in top exporter New Zealand combined with robust global demand.
The GDT Price Index climbed 3.3 percent, with an average selling price of $3,309 per tonne. The index rose 0.9 percent at the previous sale.
Prices have been supported in recent months by strong international demand, especially from Asia, combined with waning New Zealand supply.
"Some of the price lift can be put down to recent dry and hot NZ weather," said Nathan Penny, senior rural economist at ASB Bank, adding that this trend had coincided with sluggish international production and strong demand from China. "With this in mind, we expect global dairy prices to lift over 2019."
Though good news for farmers, who had struggled with a dip in prices throughout much of 2018, New Zealand dairy major Fonterra has been struggling to produce enough milk to keep pace with demand.
The world's largest dairy exporter cut its annual earnings outlook last week as extreme weather in New Zealand hit milk supply, and said it would not pay an interim dividend, sending its shares lower.
A total of 23,930 tonnes was sold at the latest auction, falling 5.5 percent from the previous one, the auction platform said on its website.
Prices for whole milk powder, the most widely traded auction, surged 6 percent in line with futures markets expectations.
The auction results can affect the New Zealand dollar as the dairy sector generates more than 7 percent of the nation's gross domestic product.
However, the kiwi currency struggled overnight against a rallying U.S. dollar and was trading down 0.2 percent at $0.6802 on Wednesday morning.
The New Zealand milk co-operative, which is owned by about 10,500 farmers, controls nearly a third of the world dairy trade.
GDT Events is owned by New Zealand's Fonterra Co-operative Group Ltd, but operates independently from it.
U.S.-listed CRA International Inc is the trading manager for the twice-monthly Global Dairy Trade auction.
A number of companies, including Dairy America and Murray Goulburn, use the platform to sell milk powder and other dairy products.
The next auction is scheduled for March 19.
(Reporting by Charlotte Greenfield in Wellington; Editing by James Dalgleish)
