The next GDT auction will take place on Wednesday next week and, as of now, all signs are pointing to another uneventful auction with only a slight movement up or down. While we have seen increases in the price of butter and cheese in recent weeks, the GDT’s weighting towards the price of milk powders make it more likely we will see only marginal movement in the benchmark dairy index.

Milk powder prices remain stubbornly weak as demand struggles to match the massive oversupply in the market. Whole milk powder (WMP) prices in the EU and Oceania range between $2,360/t and less than $2,140/t, while skimmed powder (SMP) prices are even weaker, trading between $1,860/t and $1,700/t. Realistically, prices for WMP need to be closer to $3,000/t before we see any significant lift in the GDT.

Even a strong increase in Chinese milk powder imports for the first five months of the year has done little to move market prices for both SMP and WMP higher this year. Chinese imports of WMP are almost 20% ahead of last year to the end of May in volume terms, while imports of SMP are 9% up year-on-year.

As such, it is no surprise we have seen little movement in the futures market for whole milk powder in recent months. Futures prices for whole milk powder lifted a marginal 1% this week, suggesting next week’s GDT will be uneventful.

From an Irish perspective, the continued lift in butter and cheese prices is encouraging. With a greater degree of European milk prices derived from the market price of these commodities compared with the reliance in New Zealand on milk powders, a recovery in farmgate prices may start to materialise in the back end of the year.

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