Global dairy markets were generally boosted this week as the GDT recorded a further 3.5% increase on Tuesday.

Increases in the selling price of both whole milk powder (+4.9%) and skim milk powder (+1.4%) helped drag the benchmark dairy index higher for the fourth consecutive auction.

Dairy commodity prices are undoubtedly reacting to the unfolding milk supply situation in New Zealand. Milk collections for October, the month of peak milk output in New Zealand, were down 5.5% to just over 3m tonnes this year. This is the lowest level of October milk collected in New Zealand since 2012.

Potentially even more of a positive for dairy markets was last week’s announcement from OPEC, the cartel of oil economies, that its members had reached an agreement to curb oil production by as much as 1.2m barrels a day for the next six months.

Oil prices have since lifted above $50/barrel but have not moved any higher as markets wait to see if these targeted cuts will ever actually be implemented by oil producers. With 30% of the global dairy trade accounted for by oil economies, weak oil prices will continue to hamper their buying power.

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Dairy trends: GDT prices rise as New Zealand milk supply falls