Dairy Prices Fall Again in the Latest Global Dairy Trade (GDT) Auction but Volumes are Up

The fortnightly global dairy trade fell again in its latest trading event on Monday. The event took place on August 1, 2023, and the index fell 4.35% from the previous event to an average selling price of $3,100 per metric ton (mt). The previous event had also seen a 1% fall and ended with an average selling price of $3,289 per mt. A total of 32,613 product items were sold at the last auction, with the majority being skim milk powder (SMP) and whole milk powder (WMP). Of the 157 participating bids, 124 winning bids went through 20 bidding rounds.

Whole milk powder (WMP), the product that influences payouts to local farmers to a larger extent, saw the biggest drop in average price, falling 8% to $2,864. This was followed neck and neck by cheddar and SMP, which both fell by 1.4% to $3,910 and $2,454, respectively. Butter also saw a drop of 0.7% to $4680, while anhydrous milk fat (AMF) followed with a 0.5% fall in average price to $4705. On the other hand, buttermilk powder bucked the read and rose by 9.9% to an average price of $2,207.

Traditionally, the GDT auction falls when the New Zealand milk supply is on the uptrend and goes the opposite way when the milk supply falls. Although total seasonal production for the 2022-23 year was down by more than a million mt, the market may be reacting instead to the increased YoY production at the end of the season. Milk production in May-23 was 978 thousand mt, up 67 thousand YoY.

Despite China’s return to purchasing powders and additional demand from Southeast Asian buyers by volume, an expectation from some quarters of larger milk collections in the current season is keeping prices mute. Buyers also speculate about ample product availability, making them hesitant to push through with demand and drive prices up.

Most bulk buyers are using the “wait-and-see” approach, considering the evolution of milk production in both the United States (US) and Europe, where milk collections have all trended up every month compared to the same month the previous year. The current sentiment is that, supply would continue to grow while demand wanes, leading to one thing, a bearish price trend, at least in the short term.