High milk prices are the new "normal" - and they are about to get higher as emerging markets drive up global commodity demand, says Fonterra.
Whole milkpowder prices (WMP) will likely remain at least 50 percent above their historical averages in the longer term, Fonterra chief executive Andrew Ferrier told the Bloomberg newsagency.
"The price can probably move up from today's price a way before we start burning off demand," said Mr Ferrier. "Higher prices are the new normal."
About 40 percent of the world's international trade dairy - a tiny proportion of total production - is controlled by Fonterra, particularly in milkpowder, butter and cheese.
The average price of Fonterra commodities lifted 7.2 percent to $US4246/tonne at the company's internet auction at the start of the month -- the highest level since June 1 last year.
The next online auction will be staged early tomorrow.
Fonterra's farmers are already set for a bonanza payout for the current dairy season of $7kg-$7.10/kg of milksolids, with 10,463 farmers likely to receive an average payout of over $800,000, but Fonterra has repeatedly warned them that international markets are volatile. Dairy commodities reached record levels in 2007, with WMP fetching nearly $US5000/tonne.
Mr Ferrier said dairy farmers were benefiting from the higher-than-average prices amid rising fuel, labour and grain costs globally.
"Dairying would be quite profitable for those who have owned land a long time or been prudent," he said.
But a Northland health provider chief executive said it was a national outrage that a country which produced 15 billion litres annually could not supply cheap milk to the domestic market.
Manaia Health PHO chief executive Chris Farrelly said that the price of milk in a Whangarei supermarket for a two litre bottle of milk was up to $4.79 and the cheapest was $3.65.
"Milk is vital for children's health and bone development. Milk and milk products provide energy, protein, fats, vitamins and minerals," he said.
"It should be seen as an essential food - not a luxury," said Mr Farrelly.
A children's nutrition survey showed that milk consumption had dropped by a third since the 1980s, replaced by soft drinks which were usually much cheaper.
"Low income families simply cannot afford to drink milk," said Mr Farrelly.
"The argument that milk sold in New Zealand must match international prices is a nonsense, particularly when only 5 percent of our milk production is for the domestic market".
NZPA