Futures prices for whole milk powder (WMP) have continued to rally over the last week and are now at their highest point since early January. June, July and August contracts for WMP traded on the NZX derivatives market, the New Zealand-based exchange, have gained more than 8% over the last fortnight, which points towards a positive result at Tuesday’s GDT auction.

Futures prices for WMP can act as a proxy for the performance of the biweekly GDT as WMP accounts for half of all product sold via the GDT auction platform.

Although dairy markets remain extremely weak, the futures market for WMP appears to have found a floor in recent weeks. This has helped to add some stability to the last two GDT auctions which both returned positive results.

Chinese dairy imports

The other real positive sign in the dairy market is the continued resurgence of Chinese dairy imports.

For the first three months of the year, dairy commodity imports by China are more than 37% ahead of where they were in 2015, with just under 630,000t of product snapped up by Chinese buyers.

If Chinese demand can be sustained, the outlook for a positive turn in dairy markets in the back end of the year is a real possibility. Milk supply on the other hand shows little sign of falling back with production in the EU and the US continuing to surge ahead.

For the first two months of the year, EU production has increased 7.4% to more than 25m tonnes compared with the same period in 2015. And, in the US, milk production increased 1.8% for the month of March to 8.4m tonnes, despite a slowdown from its biggest producing state California.

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