Dairy prices have jumped a further 4.8 percent, defying expectations and giving a boost to farmers and the economy.
Photo: 123rf
In the second Global Dairy Trade auction of the year, dairy commodity prices have jumped a further 4.8 percent, the fifth consecutive auction in which prices have risen.
Fonterra chief executive Miles Hurrell says the numbers defied expectations, and that's great news for farmers.
"You know great start to the year. The last five events have been heading in the right direction, you know farmers should be feeling positive about this."
The average prices for commodities is now $US3593 ($NZ2567) per metric tonne.
The auction results influence Fonterra's milk pay-out forecast.
But Hurrell said that while things were heading in the right direction, they'll wait for more events before changing their predictions.
"On the back of some increases we saw in early December, we did increase our guidance for the year, so our forecast range is now $6.70 to $7.30, so that reflected those increases we saw early. We'll continue to do our numbers on this over the next few weeks to see how things play out."
And Hurrell said their midpoint forecast price would have a huge flow-on effect.
"On our forecast, about $10.5 billion would flow in to the New Zealand economy, and our estimates are 50 percent of that is spent in their local communities, so that's a huge boost to the local communities."
Morrinsville Federated Farmers chairman Michael Garrud is also thrilled by the demand for dairy, and said it should bring some relief.
"It's great to see the commodity price go up. It's certainly a nice trend. It certainly helps rural towns, Morrinsville for example, a large part of the industry is based around dairy farming."
One rural business kept afloat by farmers is Power Farming, a company which sells tractors and agricultural machinery.
Richard Clarke is the Dealer Principal of the Morrinsville branch. He said auction results have a massive impact on investment.
"We've seen commodity prices rising steadily and that improves sentiment and confidence within the industry. I mean they (farmers) can have all the money in the world available to them but if there's no confidence, and the expectations are poor, they don't spend. So it's incredibly positive news for us."
Clark said that rise in confidence made all the difference.
"It's not gang-busters yet but we're miles ahead of where we were, confidence wise, and even what we're selling now than where we were 18 months to two years ago."
The next Global Dairy Trade Auction will be held on 2 February.