The latest Global Dairy Trade (GDT) auction wasn’t a high flying result, with the overall index down 0.9%, which is the same drop as the previous auction in mid-May.

The main price drop was for whole milk powder (WMP), which fell by 3% and accounted for half the product sold.

Skim milk powder (SMP) made up about 25% of all product sold and this had no change in price. There were small gains for butter (0.5%) and larger gains for cheddar (7.4%), but the quantity of product sold for both was relatively small, with minimal impact on the overall index.

Meanwhile, it was steady as she goes for traders in Europe, with the spot market prices for butter falling by €20/t, while WMP and SMP prices both gained €10/t and cheddar prices remained the same as the week before at €4,110/t.

Between spot market prices and GDT auction results, there now appears to be significant stability in the market, indicating equilibrium between supply and demand.

The market has to get to this point before prices start to rise. All of the indications are that dairy supply will be under pressure come the second half of the year as farmers globally react to lower milk prices.

Even domestic production in China is expected to come under pressure, as high costs and falling milk prices put pressure on farmers there.

Weather is another factor, with a bad drought already evident in southern Europe and fears looming of another drought in northern Europe. These factors are outside of farmers’ control, but they all impact on milk supply.