GDT lift below expectations

Whole milk powder was up 1.8% to an average price of US$2,304/MT and skim milk powder was up 0.2% to an average price of US$1,891/MT.

ASB's Nathan Penny says the lift was well below expectations of a 10% rise.

Although the bank is sticking to it $4.60/kgMS milk price forecast – Fonterra's current forecast - the downside risk to this has grown, he says.

Butter and anhydrous milk fat posted the largest gains of 9.0% and 6.1%, respectively. Meanwhile, butter milk powder and casein posted similar-sized falls.

"The modest rise comes despite Fonterra's lower auction volumes," Penny says. "Ahead of the auction, Fonterra lowered the amount of WMP offered by 5% from what it had signalled previously.

"Moreover, Fonterra also lowered the amount of WMP it plans to offer over the rest of the season by 9%.

"Our view remains that dairy prices will move higher over 2016. NZ production is falling hard (we estimate that production is down around 3% in the season to November compared to the same period last season) and a large hole is developing in global dairy exports, particularly for whole milk powder (WMP)."