WELLINGTON, Oct 28 (Reuters) - Dairy giant Fonterra FCG.NZ on Friday said its milk collection had dropped in September, with the reduced supply pointing to continued recovery in global dairy prices.
The New Zealand dairy co-operative said in a stock market update that its milk collection in New Zealand, the world's largest dairy exporter, had decreased 2 percent, while falling 9 percent in Australia in September.
Fonterra also noted that European milk production fallen in the three months to August and that wet weather in New Zealand had affected its October milk collection.
"With Europe dropping back as well...that will certainly have an impact on tightening the market," said Susan Kilsby, dairy analyst at AgriHQ.
"You'd expect buyers of commodity whole milk powder to sit up and take notice of that announcement," she added.
The tightening in supply from major producers of dairy was one of the main factors underpinning hopes of an ongoing recovery in dairy prices. Average prices at a fortnightly global dairy auction have risen 26 percent since July.
Prices for dairy ingredients like milk and butter have fallen sharply for more than two years, hit by a global oversupply, squeezing the finances of farmers and producers and pushing many towards consolidation in search of economies of scale.
A wetter-than-usual start to the New Zealand spring had meant Fonterra's milk collection October was down, a factor that would likely impact the whole season's balance, according to Fonterra.
"These reductions in daily milk volumes are highly unusual," Fonterra said in the statement.
The company added that growth in exports to Asia and Latin America were strong, but that Middle East and Africa remained soft.
The previous day Fonterra announced that it would lift its payout to farmers in Australia given that global dairy prices were improving on the back of reduced global supply. next Global Dairy Trade auction is scheduled for the early hours of the morning on Nov. 2.