The Global Dairy Trade auction (GDT) fell sharply again this week (Tuesday 2 August). It’s the fourth decline in a row.

As a result, many of the quotations for dairy products such as milk powder and butter are now at levels last seen in autumn 2021.

Market experts say declining dairy exports to China and the weak dairy market due to economic headwinds (inflation, high energy prices, higher interest rates) are the main causes of rapid decline in dairy prices.

In just about eight weeks, prices at the auction have fallen by 15.4%. Yes, it is falling from a very high level, so that brings some consolation, but, nevertheless, it has still happened and it is still significant.

You would also expect pressure on premium dairy brands will intensify further as the price squeeze comes on. That will mean pushing product around from one category to the other. Now that European peak is coming off, there will be some flexibility to move milk into different categories.

In late June, the price started sliding (-1.3%). On 5 July, dairy products were downgraded by an average of 4.5%, followed by a decrease of 5% on 19 July, and now this week a further 5% shift down.

Volumes sold through the auction are gradually increasing. Whole milk powder, which the GDT auction is a good measure of, was down over 6% this week to reach $3,544/t. Given the holiday effect on trading, it will take another few weeks to determine the real market effect of these auction results.