The start to Fonterra's two-weekly internet auctions of dairy product this Thursday will be watched more closely than normal to gauge whether prices are continuing the recovery started at the September 1 sale.
For New Zealand, however, a cloud is hanging over the auction in the form of the exchange rate, which yesterday pushed the New Zealand dollar to US73.17 cents before settling at US72.96c at 5pm.
Craigs Investment Partner's broker Peter McIntyre said better economic news out of the United States, strong data coming out of China, and a rising Australian dollar, all contributed to increase investor's appetite for risk, which pushed up the dollar's value.
Two weeks ago it was trading at US69.66, but it firmed to open local trading yesterday at US72.50.
The New Zealand Stock Exchange Dairy Trader predicted prices at tomorrow night's globalDairyTrade auction will stabilise, saying that an increase in the supply of whole milk powder will ease some of the pricing pressure.
It added that demand appeared strong at current prices.
Milk production in the United States was picked to grow 1.8% in the 2010 dairy season and another 1.8% in the 2011 season, as farmers react to improved milk returns and stronger commodity prices.
Prices in the last globalDairyTrade event on September 1 rose 16.9%, reversing four months of declining prices.
Other dairy products not sold on globalDairyTrade, such as butter and cheddar, were also strengthening in price, according to the Dairy Trader.
The market for skim milk powder would be stabilised by the European Union accepting slightly lower tender prices for stockpiled product than current local prices.
