Global dairy prices slump 4.9% in biggest fall in two years as supply surges

By RNZ

Milk prices have had their largest drop in two years at the Global Dairy Trade auction.

The average price fell 4.9% overnight to US$3793 ($6685).

It followed a 2.8% fall at the previous auction, almost a month ago.

In a note, New Zealand Exchange dairy analyst Rosalind Crickett said prices continuing to soften across most products was “well and truly expected”, coming off the back of an abundant supply of dairy products and Fonterra’s seasonal rise in volumes on the platform, which was met by weaker demand.

“The excess supply of milk in the market has put natural downward pressure on both milk powders,” she said, adding that the falls were heavier than anticipated.

She said global milk production in the year-to-date had shown strong growth across all major milk-producing regions bar China, which was down 4.6% year on year.

Volumes for whole milk and skim milk powders were up almost 20% on the equivalent event last year, highlighting how much extra product is available in the market, and global inventories are on the rise.

The important whole milk powder price fell 4.4% to US$3425 ($6034).

Skim milk powder fell 7%, while anhydrous milk fat was down 3.9%, butter fell 5%, cheddar dropped over 12.3%, and lactose dipped 3.6%.

On the positive side, butter milk powder rose 8.2%, and mozzarella was up 3.8%.

Looking ahead, Crickett said recent market developments on the global milk production scene showed early indications that the year-on-year production growth trajectory was starting to change.

“Heatwaves across Europe have proved as a hindrance to productivity, most notably in France and Belgium, with some heat-stress-related dairy cattle fatalities also reported in Jersey.

“The announcement of El Nino conditions arriving in the tropical Pacific last week could further add to the production output decreases in the months to come.”

- RNZ