This week’s GDT auction saw the benchmark dairy index increase a further 4.5% to its highest point since July 2014. While there were price increases across the board for all dairy commodities, the primary driver was the further improvement in milk powder prices.

Skimmed milk powder (SMP) saw the strongest growth, with prices increasing 10% to just over $2,560/t. SMP prices are at their highest point since March 2015.

Whole milk powder (WMP), the most important commodity traded on the GDT, saw prices increase a further 3.2% this week to more than $3,400/t. Since July, the average selling price of WMP has surged almost 60% due to a combination of tightening supplies and improving buyer demand.

For this week’s auction, New Zealand dairy processor Fonterra offered just 12,500t of WMP for sale. The processor has been steadily reducing its supply of WMP in recent weeks as it adjusts to declining milk collections from its farmer suppliers. Just a month ago, Fonterra was selling closer to 18,000t at the auction.

The milk supply picture in New Zealand will not have been helped following the 7.8 magnitude earthquake that hit the south island at the weekend.

Fonterra has already said that some farmers in the south island may have to dispose of milk, as it will not be possible to make collections due to severe road damage combined with power outages from the earthquake.