Dairy Prices Continue to Rise on Global Dairy Trade

The average price index of the GDT has increased by 4,1% compared to the previous auction day. Even then, dairy prices rose sharply: by an average of 4,6%. Prices of dairy products have risen across the spectrum, with powders being the biggest price pushers. Whole milk powder, by far the most important product on the GDT with almost 60% of the supply, increased in price by 5,8% to an average of US $4.324 per tonne. Skimmed milk powder also rose in price: by 2,1% to $4.051 per tonne. For skimmed milk powder this is by far the highest price in the past five years. Buttermilk powder (BMP), which was offered for the first time since January 4, also joined the positive powder trend by rising 9,7% in price to $4.009 per tonne.

Prices also rose on the fat side. Butter rose in price by 3,3% to an average of $6.359 per tonne, which is also the highest level in at least five years. Butter concentrate (AMF) rose 1,4% to an average price of $6.800, while Cheddar rose 2,4% to an average price of $5.684 per tonne. The pluses in the market were not so much due to the supply at the auction: at almost 28.500 tons it was almost the same as the same period last year. The supply was lower than the previous auction day: just under 6%, with less skimmed and whole milk powder offered. However, this is also a seasonal trend.{{dataviewSnapshot(6_1643732382)}}

Milk supply determines the dairy market
An important driver for the current upward movement of the GDT is the milk supply in New Zealand. This one ran back in December already and the signs for January are not encouraging either. Market experts report in New Zealand media that January was a dry month for dairy farms, which will certainly have a depressing effect on milk production in that month. A movement that is expected to be felt until the end of the milking season at the end of May. Buyers are therefore aware that in the coming months more dairy products will not come onto the market due to the lower milk production.

On the other hand, the current high price levels could lead to a drop in demand for dairy products, especially from the less prosperous regions, according to analysts. The buying appetite of buyers from, for example, Africa, the Middle East and parts of Southeast Asia can be tempered by the relatively high dairy prices. A change in the purchasing behavior of major buyer China can also have a significant impact on the dairy market, it sounds like.

High feed costs dampen milk production
The big question now is whether the rising prices in the global dairy markets - as made last week also the DCA quotations for Northwest Europe a strong upward movement - will also have an effect on milk production. Are dairy farmers in Europe, in particular, which is working towards the seasonal peak in the spring, and the United States encouraged to ramp up production by higher price levels? That is, given on the high feed costs that dairy farmers also have to deal with, so far not a foregone conclusion.