Dairy prices down 3.8pct in latest Global Dairy Trade auction but demand remains high

In the previous auction two weeks ago, prices hit a seven-year high.
In the previous auction two weeks ago, prices hit a seven-year high. Photo credit: Getty

Dairy prices fell 3.8 percent in the latest Global Dairy Trade  (GDT) auction overnight, to an average price of US$4089 per metric tonne (MT).

It was the first decrease in prices in four months and came after a staggering 15 percent rise in average prices in the previous auction two weeks ago, including a rise of 21 percent for whole milk powder.

Prices at that auction hit a seven-year high, meaning even with the latest drop prices remain elevated.

Prices for whole milk powder - the most important commodity for Kiwi farmers - fell 6.2 percent to US$4083/MT. Butter was also down 2.8 percent to US$5659/MT.

All other commodities on offer were up, with lactose rising 8.6 percent to $1392/MT, anhydrous milk fat increasing 3.7 percent to US$6155/MT and skim milk powder up 0.7 percent to US$3350/MT.

A total of 26,872 metric tonnes of product was sold at the auction.

"This GDT Event was always going to be a test for the market, given how prices spiked in the first week of March," said Emma Higgens, senior dairy analyst at Rabobank.

She said there was more product on offer to buyers in this auction compared to two weeks ago, with more than 20 percent whole milk powder for sale and 4 percent skim milk powder available.

"The additional GDT volumes were significant and so for average whole milk powder prices to remain above the US$4000 mark is a really good result, as too was the (small) price gains for skim milk powder," Higgens said.  

Higgens said given global supply and demand dynamics, a strong milk price was still forecast.

"At a broad level, we think that the expensive cost of producing milk (and whole milk powder) in China, overlaid with the complexity of global shipping disruptions, alongside modest global milk production growth lends itself to elevated whole milk powder prices over the coming months."