Global Dairy Trade: Beijing bounce needed for butter bonus

Australian dairy farmers are enjoying a bumper season at the farmgate — but the tepid Chinese economy lingers as a concern

A Beijing bounce-back is needed for Australian dairy farmers to have any prospect of a step up this season, industry watchers say.

The Global Dairy Trade slumped to its lowest point since November 2020 this week, with the headline figure now resting at $US3289 ($A4854) per tonne.

This week’s 1 per cent cut to the headline figure was the second consecutive loss on the international dairy index with a 3 per cent cut at the previous fortnightly trading session.

The price of wholemilk powder, which influences the payouts to New Zealand farmers particularly, fell 1.5 per cent this week to US$3100 ($A4574) per tonne.

NSW Farmers dairy committee chairman Phil Ryan said while Australia's dairy sector had become more domestic market focused in recent years, a GDT uplift later in the year would be welcomed.

“Farmgate prices started strongly but everything from electricity prices to interest rates and council rates are eating into those profit margins,” the Bega Valley farmer said.

“China is a huge market. Even when there’s small changes to the economic situation there, we in Australian agriculture feel it. Clearly, things economically in China have been weaker in the past few months and that’s been reflected with international dairy trade.”

The Global Dairy Index has dropped to its lowest point since November 2020. Picture: Zoe Phillips

In a snapshot released by New Zealand agrieconomists this week, Westpac predicted a Chinese bounce-back on GDT trading later this year.

Westpac NZ economist Darren Gibbs said he “expected improvement in Chinese dairy demand” later in 2023, which would help lift the GDT commodity figures.

But Mr Gibbs added that underwhelming Chinese dairy demand “will put downward pressure on prices in the short term”.

Milk2Market exchange commercial development manager Richard Lange said Chinese demand for dairy had been weak for most of the calendar year.

“One of the key changes this week has been the lift in the Australian dollar by two cents. That undercuts our competitiveness on exports without doubt,” he said.

“With such high opening prices to begin with, the prospect of step ups was always less likely this season. A weaker Chinese market just decreases that likelihood further.”