In the second auction of 2017, the GDT index posted a marginal gain of 0.6% thanks to increases in the average selling price of fat-filled dairy products. At Tuesday’s GDT auction, there were increases in the price of butter (+2%), cheddar (+1%) and anhydrous milk fat (+4%). However, these products account for less than a quarter of product sold on the GDT.

Milk powders, which account for 75% of volumes sold on the GDT, continue to drag the performance of the benchmark dairy index, as market demand, particularly from Chinese buyers, remains tepid throughout January.

Whole milk powder (WMP) prices were relatively flat (-0.1%) at just over $3,280/t, while skimmed milk powder (SMP) prices declined almost 2% to just over $2,600/t. The trend over the last month has seen WMP prices retreat to settle under $3,300/t at the last two GDT auctions, well below the $3,500/t level sustained through November and December.

Despite this dip since the start of the new year, it must be remembered that market prices for WMP have improved 60% in the last six months and are in a much healthier position.

For SMP, the slow unwinding of the EU Commission’s massive intervention stocks should continue to set the ceiling on market returns.

Likewise, the strong production figures from the US, which is a major SMP exporter itself, will also act as a handbrake for any meaningful gain in the price of SMP.