Global Dairy Trade is backing off, is bottom in sight?

The GDT Price Index, which represents the average value of the dairy auction, has fallen by 314% this edition 2,9 to 1.129 points. This means that the GDT has already fallen by a total of 17,3 percentage points in the past five editions. To give you an idea: this means that the international dairy market - if we can call the GDT the indicator - is back at the level of February 2021. This means that the peak in the market, which reached its highest point on March 1 of this year with 1.539 points, is once had at the GDT, almost completely polished it off in a period of 2,5 months.

An average decline of 2% to 3% in the Price Index was expected by most analysts, mainly looking at developments on the New Zealand futures market NZX. This has mainly written red figures in the past period. Fonterra had also significantly increased the total supply at the auction (more than 10,5%) compared to the previous auction day, although the dairy giant does follow a normal seasonal pattern during this period of the year. With a sold volume of more than 30.300 tons, the supply was higher than in the special year 2021 in the same period, but lower than in previous years.

Lower purchasing appetite China is setting the tone
It is mainly the Chinese market that is bothering Fonterra as a major exporter of dairy products during this period. The Chinese economy is experiencing a significant growth slowdown, which is reflected in lower consumer spending. This in turn also affects China's import of dairy products. According to the latest figures, these are considerably lower, with a decline of more than 17% in one year. As a result, dairy supplies in New Zealand are increasing significantly. Although milk production in New Zealand is declining, this is insufficient to counterbalance declining dairy exports. Whether the bottom of the international dairy market is in sight depends largely on Chinese purchasing appetite and whether the country's economy picks up again in the second half of this year.

Today's GDT was not completely red. In particular, whole milk powder and butter concentrate (AMF), together accounting for more than 60% of the supply, were the main drivers behind the average decline of 2,9%. Whole milk powder, whose supply was considerably higher than at the previous edition, had to lose 3,5% and reached an average price of US $3.417 per tonne. AMF lost no less than 9,8% of its value and ended up at $4.990 per tonne. Butter and whole milk powder remained virtually stable compared to last time, while cheddar rose 4,2% in price to reach an average value of $5.005 per tonne.