The recent upsurge in the GDT at the last two auctions (up 7% and 12.7% respectively) has lifted sentiment in global dairy markets following months of falling prices. The surge in whole milk powder (WMP) prices is being attributed to a tightening of supply.

In New Zealand, the world’s largest exporter of milk powders, milk production for the coming season is forecast to decline 3%, meaning less milk to convert to powders. At the same time, Fonterra has been shifting its product mix in the last year, with more milk given over to higher value-add products and less powders.

This tightened supply is reflected in dairy futures markets with October, November and December contracts for WMP climbing 10% in the last week and up 26% since the beginning of August.

However, despite the upturn, questions remain over the sustainability of the rally. Speaking to the Irish Farmers Journal this week, Charlie Hyland of FC Stone cautioned that it was notable there was little or no buying from Europe, the Middle East or North Africa at the last GDT auction.

He added that Chinese buyers will be very active for the next few GDT auctions as they time buying with the start of the New Zealand milking season.

But once that buying drops off, what will happen if the market is not supported with buying from the Middle East and North Africa? Without this, there is a concern that the rally may not go on forever, he said.