Global Dairy Trade: Australian step-up hopes smothered

Prospects of a step up from low farmgate prices have been dealt a blow with a key dairy index falling this week.

Prospects of farmgate step ups from above the cost of production have been dealt a blow with a key international dairy index going into freefall.

The headline figure of the Global Dairy Trade index dropped 6.9 per cent overnight, the largest single session fall since August 2023.

Whole milk powder fell 4.3 per cent to an average of $US3218 ($A4819) per metric tonne while skim milk powder fared worse, dropping 6.1 per cent to an average of $US2586 ($A3872) per metric tonne.

Butter was the biggest loser in the latest fortnightly trading session, down 10.2 per cent to an average of $US6546 ($A9802) per metric tonne.

Rabobank dairy analyst Michael Harvey said falling international prices would quell any movement in Australian farmgate pricing for the foreseeable future.

With the new season starting on Monday, most processors nationwide are offering between $7.80 to $8.30/kg of milk solids, figures that Dairy Farmers Victoria estimates only cover the cost of production.

“It is only week one of a new season — there is potential for step-ups for this financial year but this GDT result doesn’t help,” Mr Harvey said.

“At the start of the year, we predicted there to be a softer start to the 2024-25 season, that’s now taking place. But there’s a lot of water to flow under the bridge.

“We have to take into consideration the spring peak in New Zealand, how that works out, whether there’s economic recovery in China — all of that will play into the potential for step ups at the Australian farm gate.”

Maxum Foods procurement chief John Hallo said this week’s GDT drop would inevitability suppress the potential for step ups in spring.

“It wasn’t a surprise but the extent of it was weaker than anticipated,” he said.

“Global demand was built around China and that’s fallen away in the past 12 to 18 months with that shift in focus to southeast Asia, the Middle East and northern Africa.”