Global Dairy Trade Auction Sees Price Upswing

GLOBAL - This week's Global Dairy Trade (GDT) price index showed a 3.6 per cent increase from the previous trading event, at an average price of $2,419 (USD/MT, FAS).

2 December 2015

2 minute read

Skim milk powder increased in price by 3.2 per cent, whilst whole milk powder increased by 5.3 per cent at the auction on Tuesday.

Butter prices also increased, by 5.7 per cent, whilst butter milk declined by 5.6 per cent and cheddar declined by 1.5 per cent.

The price increases follow three consecutive trading events with falling prices.

The Irish Farmers' Association National Dairy Committee Chairman, Sean O’Leary, said the auction should be read in the context of a slow rebalancing of dairy markets.

“Fonterra have varied their product offering through the auction, providing customers with age-guaranteed powders, fresh on delivery, for a price premium. Also, the quantities going through the auction were low, at just over 28,000t. Both those factors undoubtedly helped improve the auction result,” Mr O’Leary said.

“However, there are more fundamental factors at play here: NZ output is falling back dramatically this season, with credible official forecasts 5-10 per cent lower than last season. US production was almost static in October, with domestic demand growing faster than output. Europe’s big dairy countries Germany and France have also barely maintained their milk supplies this year,” he said.

“Apart from lower levels of fresh output, there is also evidence that stocks are being run down. A Fonterra analysis of the Chinese WMP market has concluded that their powder stocks have fallen to their lowest level since March, to roughly half of what they were then.

"The same analysis also forecasts a consumption growth of 4 per cent per annum in China for the next 10 years, with domestic supplies failing to keep pace, underpinning continued significant levels of imports,” he said.

“It is important to remain realistic: even if prices remain unchanged, milk receipts to farmers will dis-improve over the coming months because of lower volumes and constituents, and it will be some time before we see an upswing in farm gate prices. However, I believe we are seeing the first signs of a real rebalancing of markets,” Mr O'Leary concluded.