It was another difficult week in the dairy markets, as price drops in Europe were compounded by further price drops at the Global Dairy Trade (GDT) auction in New Zealand.

The GDT auction fell by a substantial 2.8%, with significant price drops for powders.

Skim milk powder (SMP) fell by 3.6% to reach €2,902/t, while whole milk powder (WMP) fell by 3.1% to reach €3,092/t.

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All other product categories also fell, with cheddar cheese dropping by 3.4%, butter dropping by 2.4% and mozzarella cheese dropping by 5%. What is of note is the very small quantity of product traded at the GDT, a trend in recent months.

Meanwhile, back in Europe, prices on the spot market continue to fall, with butter down €25/t this week to €3,600/t. There was also price drops for powders, with SMP down to €200/t to €2,550/t, which is at a big discount to the GDT price at €350/t cheaper. European WMP was also back, dropping in price by €50/t to €3,150/t.

It’s interesting to note that new Fonterra CEO Richard Allen was a bit more pessimistic on milk price in his latest bulletin to members. Even though the forecast milk price increased slightly, he said the Middle East war is having an impact.

“We acknowledge the uncertainty caused by the ongoing conflict in the Middle East. Like our farmers, and others around the world, we are experiencing cost inflation and shipping disruptions.

“We are confident that our deep relationships with customers and logistics partners will continue to help us navigate these challenges,” he said.

With the end to hostilities, it will be interesting to note how quickly before shipping costs reduce.