Lack of Chinese buying power in the New Zealand (NZ) dairy commodity markets is the main reason why the NZ Global Dairy Trade (GDT) auction result was down again this week, according to market analysts.

For the third auction in a row, the average result was down, this time -3.9%, with drops of 4.6% and 3.5% before.

Whole milk powder (WMP) was down 3.4% to $3,279, while skim milk powder (SMP) was down 8.5% to $2,972/t.

The inflationary pressures being felt globally (higher food prices, interest rates and energy prices) were not indicating that the market would improve.

However, for this particular auction, the thinking is that if China was active, the price would hold.

COVID-19 lockdowns and inflation pressures are still present in China and that is keeping a lid on demand from that part of the world.

If we look back, milk powder price peaked in April and it is down 35% since. Powders in the last few weeks are feeling the heat.

Lack of demand

It seems to stem from lack of demand in China and Europe. There are rumours that China is going to relax its COVID-19 zero-tolerance policy, but nothing is published yet on this.

The EU futures markets are softening also, as is the physical market. In the world market, NZ product is the cheapest, while the US is the most expensive. EU product is in between.

The low SMP price is somewhat expected seasonally in NZ as they peak on supply - buyers know they have to produce so hold back from the market.