Prices dropped by a further 1.1% at this week’s Global Dairy Trade auction run by Fonterra.

The main driver was a 7.1% fall in the price of whole milk powder. In contrast, butter price rose by 7.3% and skim milk powder rose by 5.7%. Whole milk powder is a key product for New Zealand – there are expectations that Fonterra’s price forecast of €5.30/kg of milk solids will be cut by up to 10% to around 20c/litre in Irish terms.

Weaker buying

Weaker buying from China is seen as the main factor in the GDT auction results. China’s WMP imports for September fell below year earlier levels for the first time since August 2013. In September 2014, the country imported 9,400t of WMP, compared with 25,600t in September 2013.

Imports this year have been on a declining trend following a surge of buying at the turn of the year, which eventually reached record levels in January 2014.

On a cumulative basis (January to September), WMP and SMP imports are 56% and 35% higher respectively, when compared with the same period in 2013.

Meanwhile, the latest estimates from the International Dairy Federation (IDF) is that total global dairy production is running 3% ahead of last year.

For 2015, the IDF forecasts 2% supply growth and a price improvement in the second quarter.

However, there is little sign of supply growth easing – New Zealand’s peak milk month of October delivered a record 270 million kilogrammes of milk solids, with volume up 4.5% on the same month last year but milk solids up by a higher 5.4%.

Milk production in the US during October totalled 7.5 billion litres, up 3.9% from October 2013. Production per cow was 2.7% higher than October 2013.