This weeks’ Global Dairy Trade (GDT) auction was the first since Fonterra announced its revised milk price forecast for the 2023/2024 season.
The result was horrendous, with the index dropping 7.4% and whole milk powder (WMP) dropping by a staggering 10.9%.
In many ways, it was to be expected, as Fonterra effectively told the market last week that prices were going to fall, so why would buyers pay more for product now?
The problem with Fonterra is that it has no home for vast quantities of its milk. Chinese imports are back significantly on 2019 to 2021 levels, as it ramps up its own internal dairy production.
The Chinese economy has slowed and that’s probably affecting demand also. Fonterra has to sell and unless demand picks up in the rest of the world, it’s likely that we will see further price drops.
Having said that, European traders seemed to take less notice of what is happening in Australasia, with the spot market for WMP actually increasing by €110/t this week.
Butter increased by €50/t, but price drops were reported for skimmed milk powder (SMP) of €10 and cheddar dropped by €30/t.
The quantity sold at the GDT was high, at over 33,000t, so product is shifting at these prices. It seems that the supply/demand balance is finely matched, but it is market sentiment that’s driving down prices.
There was further evidence of this last week with Kerry Group’s fixed milk price offering for March to October 2024 of 31.78c/l excluding VAT.