The European supply volumes published are still not yet picking up the extent of the supply decrease. The EU June data shows a small decrease.

The supply drop is much more and concerns over grass growth and winter feed dominate. We’ll see more numbers towards the end of August.

In France, milk supply is steadily decreasing all year. In Germany, the milk supply is also falling sharply. Both are the big EU players.

On Tuesday this week, the Global Dairy Trade (GDT) auction saw the average price fall again. The index dropped 2.9%, which wasn’t as bad as the 5% recorded in the auction previous to this. This is the fifth decrease in a row. Cumulatively, this is an 18% drop for the last five auctions.

China is an important influence on this New Zealand (NZ) auction result. NZ delivers over 50% of the Chinese milk powder requirement. If China sneezes, NZ catches a cold.

Smaller appetite

China is suffering at the moment. The smaller appetite for buying from China sets the tone for the market. It seems the Chinese economy is in a sharp slowdown in growth, which is reflected in lower consumer spending.

This, in turn, also has an effect on China’s import of dairy products.

According to the latest figures, these are considerably lower, with a decrease of nearly 20% in the last year.

The knock-on is dairy product stocks in NZ are rising. So while NZ milk production is falling, it’s not falling enough to counter the lower requirement from China. All eyes on China to see what happens there next.