Global Dairy Trade Shows Biggest Increase Since 2016

The price of whole milk powder, New Zealand's main dairy export product, rose by as much as 14% to $3.208 per tonne. This is the highest level since January. The price of skimmed milk powder increased by 3,5% to $2.694. Not a very big increase, but a nice price gain that made up for part of the corona damage. At the beginning of this year, the quote was still above the $3.000 mark. This means there is still some way to go to get close to pre-corona levels. 

The fact that the average price at the auction has risen by 8,3% (the biggest increase since 2016) suggests that other manufacturers also showed an increase. The price of butter and cheddar both increased by a whopping 3% to $3.762 and $3.717 per tonne, respectively.

Chinese buying interest?
It is difficult to say what caused the big revival for whole milk powder. Milk production in New Zealand is in a trough in June and July, which limits availability. In addition, the recovery points to increasing Chinese buying interest, although that is an assumption. In any case, the auction result is the desired incentive that the stable dairy market was waiting for. Whether this also triggers a reaction in Europe will become clear later this week.  

The ASB Bank in New Zealand sees the price recovery as a positive signal for higher milk prices. All the more so because whole milk powder weighs heavily on the raw material value of milk. The forecast that the bank has already issued for the 2020-2021 season is between a range of $6,50 to $7,50 per kilo of milk solids. This is significantly higher than Fonterra's forecast which is between $5,40 and $6,90.