The Global Dairy Trade (GDT) auction this week rose 10.9%, but more importantly whole milk powder (WMP) rose 12.1% to US $2,078/MT. The volume of product traded was again lower than seasonal norms at 35,865MT, which is over 30% below normal.

It is definitely good to see prices rising and the rise in the GDT has been matched by some international commentary suggesting the Chinese are more active in the market for dairy product.

However, we are all too well aware of the lag in rising prices on farmgate prices and that two rises following 10 falls means there is a long way back on global dairy prices.

The price rise is in line with what some expected, as the futures market is still ahead of the GDT market in New Zealand. Skim milk powder also rose 11.7% to trade at $1,698 in the last auction. Butter was also up and rose 8.1% to trade at $2,746/t. Cheddar rose 4.7% to trade at $2,913/tonne.

All eyes at the moment are on what milk supplies will be in New Zealand. The New Zealand research and advisory body Dairy New Zealand is predicting a 2% to 3% drop in New Zealand production this year, but it’s very early days.

With a big El Nino brewing (apparently), we could see significant droughts in parts of NZ, which would seriously curtail regional production. So, a cut of 5% is certainly possible.

July figures are very small as cows are just calving now and August figures are not available yet.

I heard reports last week that New Zealand was ahead of production, week-on-week, but I haven’t seen any figures just yet.

There are a lot of dairy cows being culled – in fact, the dairy cows are threatening the New Zealand US beef quota – up more than 20% year-on-year.