Analysis Business Dairy
Soaring prices again on Global Dairy Trade
On the Global Dairy Trade (GDT), prices for dairy products such as butter and milk powder rose sharply for the third time in a row today (Tuesday 15 February). This raises the average price index of the New Zealand internet auction to the highest level since the spring of 2013. What is driving prices so high?
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The average price index of edition 302 of the GDT increased by 4,2%. Dairy prices have been on the rise since the anniversary edition 300 of the GDT in mid-January. Then the average price went up by 4,6%, followed by a 4,1% increase at the February 1 auction. Prices rose sharply across the entire range. For example, whole milk powder, which made up more than 60% of the supply at this GDT, rose by 4,2% in price to an average of $4.503 per tonne. The price of skimmed milk powder went even further and increased by 6% to €4.295 per tonne. These are the highest rankings since 2014 for both powder products.
The progress on the fat side also appears to be unstoppable. For example, the butter price has reached a record level of $6.686 per tonne, an increase of 5,1%. Butter concentrate (AMF) also participated in an upward movement with a plus of 1,2% to a record $6.889 per tonne. Just like the limited available Cheddar (+3,5% to $5.881 per tonne) and lactose (+3,4% to $1.609 per tonne). In any case, the strong price increases were not due to supply. Although this was slightly lower than the previous auction day - mainly due to the lack of buttermilk powder (BMP) - but at 27.726 tonnes it is in line with the previous auction days in mid-February in recent years.
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Uncertainties about milk production
The third price increase in a row was already in line with analysts' expectations and is mainly due to developments in supply. Sales on the dairy markets are still going smoothly, in New Zealand, the United States and in the European Union. However, the biggest driver of the current trend is milk production. This seems to be at its peak in the EU and certainly in New Zealand. Despite the positive market segment and rising milk prices, dairy farms appear to be at their maximum in terms of milk production.
The uncertainty about the availability of the raw material milk, especially now that milk supplies are declining seasonally in New Zealand with autumn and winter approaching, is giving the markets an upward impulse.