Global Dairy Trade is really sinking now

The average price of the 287th auction day of the GDT is €3.924. For the GDT Price Index this means a decrease of 3,6% compared to the previous auction day. This is the sharpest decline in the index since mid-March. Since then, after rising sharply from September 2020, the GDT has remained fairly stable with only minor corrections of 0,1% to 1,3% down.

Higher milk production in US and New Zealand
However, the decline is not unexpected. Globally, the demand for dairy is disappointing expectations. With the relaxation of the corona measures in various countries and sales areas, additional demand from the catering and food service industry was taken into account. However, that expectation does not appear to have come true. In addition, milk supplies have grown significantly in recent months in the United States and New Zealand, among others. This results in additional supply, which, for example, also puts pressure on the quotes on the CME (US) and NZX (New Zealand) futures markets.

In addition, the supply on the last auction day of the GDT was also considerably higher than the previous time: a plus of just under 14%. The supply of skimmed milk powder, butter and cheddar in particular increased considerably. The volume of whole milk powder remained virtually the same. The demand for whole milk powder from China is still steady for supplier Fonterra for now and in the coming months, meaning that more offering on the GDT is not necessary. Although the supply had risen sharply, at 24.500 tonnes it does not differ much from the supply in the first week of July in recent years.

Does the GDT set the tone for the coming period?
The average prices of the last auction day made it clear that the supply is currently just too much. Skimmed milk powder fell 7% in value to $3.126 per tonne, butter fell 3,2% to $4.458 per tonne, cheddar (pictured) fell as much as 9,2% to $3.949 and whole milk powder fell 3% to $3.864 per tonne. Only butter concentrate (AMF) held up reasonably well with a depreciation of 0,9% to $5.623 per tonne. The very limited supply of buttermilk powder (BMP) fell by 9,8% in price and the value of lactose remained stable at $1.238 per tonne.

It is still unclear whether this move by the GDT also sets the tone for developments in the dairy market in the coming period. For example, the DCA dairy quotations for Northwest Europe have also generally been under pressure in recent weeks, with the exception of spot milk, but trade remains cautiously optimistic for the medium term. Much depends on whether or not the corona measures are further relaxed in the various sales areas and the long-term security behind this. This could give the dairy trade more courage to take positions further ahead. 
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