A further rise of 16.5% in the Global Dairy Trade (GDT) price index at this week’s internet auction of dairy commodities has been welcomed all round in the trade. But local milk processors in Northern Ireland were quick to point out that it has brought the average GDT return up to between 16p and 17p/litre.

This is less than the current prices being paid for ex-farm milk in NI and, although moving upwards, it doesn’t automatically lift prices here.

It has also been pointed out that this GDT was selling products for delivery between November 2015 and March 2016.

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However, the trend in prices in Europe is positive, with the official Dutch price quotes on Wednesday up by €80/t for butter and €60/t for whole milk powder (WMP). That brought them to €2,750/t and €2,130/t – their highest level since mid-July.

Smaller increases of €10/t were reported for skimmed milk powder (SMP) at €1,700/t for food grade and €1,580/t for feed grade. For all of these products, the latest Dutch prices remain below the average prices of 2015 to date, but the trend of slight improvement in prices since the beginning of September is welcome.

Amid the positive trends, traders continue to warn that the last three GDT auctions have seen reduced offerings of product by New Zealand’s Fonterra dairy co-op, down by more than 10,000t per auction (a drop of over 25%). That has changed the dynamics of supply and demand in the GDT and has been reflected in price rises of 16.5%, 10.9% and 14.8%.

At Tuesday’s auction, WMP prices were up by 20.6%, SMP was up by 17% and anhydrous milk fat was up by 13.7%. Butter prices lifted by 13.3% and cheddar by 10.7%.

The stronger tone in the trade has been underpinned more by predictions of reduced milk output in New Zealand due to cow slaughterings and the so-called El Niño weather pattern, which is associated with drought later in the season. Those factors may well curtail the volume of milk produced, but if output is not as low as anticipated then no one seems to know what will be done to market the product that wasn’t offered at these auctions. The three recent increases come after 10 consecutive drops in the GDT auction since March 2015.

Just 36,050t of product was sold at this week’s auction compared with 50,801t sold this time last year. At the previous two auctions, the tonnages offered were just 35,865 on 1 September and just under 37,000 on 18 August. That’s a reduction of over 40,000t in three auctions compared with the volumes sold in the corresponding auctions last year. It’s a reduction of 10,000 on the tonnage offered in the auction on 4 August 2015.

Milk prices down in NI

The first indication of base prices for August milk supplies in Northern Ireland is Lakeland Dairies, down by 0.5p to 17.75p/litre. Base prices of other milk buyers in Northern Ireland were not available as the Irish Farmers Journal went to press this week.