Last week’s agreement between OPEC members to curb oil production by 1.2m barrels a day for the next six months has sent oil prices to their highest point in almost 18 months. Brent crude oil is currently trading above $55/barrel for the first time since July 2015 and will certainly come as welcome news to international dairy markets.

As Glanbia Ingredients Ireland (GII) chief executive Jim Bergin noted last week, the buying power of oil economies has been decimated by the collapse in the oil market. With oil economies accounting for 30% of the global dairy import market, Bergin said he remained concerned about the fragility of the demand side of the market as long as oil prices remained below $50/barrel.

The rally in global oil markets has certainly boosted sentiment in dairy markets in recent days. The New Zealand futures market for whole milk powder (WMP) has made gains in the last week, which may point to a positive result at this week’s GDT auction.

January, February and March contracts for WMP have lifted 2.5% since the OPEC agreement last week. Should oil markets continue to make gains in the coming months, the knock-on effect for dairy markets should be positive.

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