The result from this week’s GDT auction in New Zealand is indicative of the uncertainty that has gripped global dairy markets so far this year.

Despite a number of signs pointing towards a third consecutive lift in the benchmark dairy index, the opposite occurred on Tuesday as the GDT fell 1.4%, with an average selling price of $2,200/t.

Despite an increase in the average selling price of whole milk powder (+0.7%), casein (+3.5%) and cheddar (+1.8%), declines in the price of butter (-5.5%), butter milk powder (-5.5%) and skimmed milk powder (-3.6%) all combined to drag the dairy index lower.

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In the lead-up to this latest auction, futures contracts for whole milk powder (WMP) traded in New Zealand had risen by 8% in price over the last fortnight, pointing towards a positive result in the GDT.

Positive signals

Coupled with this, dairy import figures coming from China for the first three months of 2016 have been very encouraging. The world’s largest importer of dairy commodities, China’s imports are more than 37% ahead of where they were in 2015 in volume terms, with just under 630,000t of product.

Other major dairy importers have shown increased appetite, with butter imports showing a remarkable rise in Canada (+104%), the US (+88%) and Russia (+57%).

Many would have felt that positive demand signals such as these are just what the market has been sorely lacking, but prices have yet to react in any meaningful way.

The price point of dairy commodities has plunged in the last year and buyers appear in no rush to push it back up any time soon.

The lack of any traction on price at the latest GDT auction demonstrates this.