Global Dairy Trade clearly in minus this time

It was the fourth consecutive time that the GST average price index was minus. The decline of -0,9% to an average of US$4.128 per tonne was limited, but nevertheless the strongest of this quartet of auctions. This means that the trend on the GDT as a reflection of the dairy market remains more or less stable, but under slight pressure. Especially because almost all major product groups at the auction were valued less.

For example, looking at the price movements on the New Zealand futures market NZX in recent weeks, Fonterra had apparently anticipated that the price of whole milk powder could come under pressure. Even though the supply of whole milk powder was reduced by approximately 10%, this could not prevent a drop in the price. Whole milk powder, which accounts for more than half of the volume offered at the GDT, fell 0,5% in price to average $4.062 per tonne.

Punishment with butter
The supply of butter and butter concentrate (AMF), skimmed milk powder and cheddar was higher or significantly higher than the previous auction day on May 18. More than 10% to no less than 40% more volume was offered for butter and AMF respectively. Remarkably, the punishment for this was relatively greater with butter than with concentrate. Butter fell 5,4% in price to an average of $4.690 per tonne, while AMF gave up just 0,8% to reach a median price of $5.654 per tonne.
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Skimmed milk powder fell 0,5% in price to $3.415 per tonne, which may be an effect of the more than 4,5% higher volume offered compared to the previous auction day. The minimally offered lactose and buttermilk powder (BMP) also fell by 1,6% and 7,5% in average price respectively. The only dissonance in this parade of negatives was cheddar. Although the supply of cheddar was almost 2,5 times higher than the previous auction day, cheddar was in demand. The average price increased by 0,5% to $4.324 per tonne.

Milk supply dampens the market
The slightly downward trend on the GDT seems to follow the movements on the NZX and the American futures market in Chicago, the CME. Milk production in both New Zealand and the United States is on the rise, as dairy farms anticipate rising prices on the dairy market in recent months. This effect seems to dampen the enthusiasm of the dairy market somewhat, now that sales are being reorganized here and there after the opening of sales markets due to the relaxation of the corona lockdowns.

In New Zealand, milk supplies will traditionally drop sharply in the coming months, with winter approaching. It is difficult to estimate given the circumstances what effect this will have on the movement of prices at the upcoming GDT of June 15. Increasing milk production is not so evident on the European dairy market due to the relatively cool spring. The DCA dairy quotes of the past week actually rose slightly, while the prospects for the coming weeks for the relaxation of the corona measures are described as favorable.