Global Dairy Trade in neutral amid Trump tariff tribulations

American tariffs have left dairy trade in neutral. What could it mean for the new season farmgate prices in Australia?

International dairy trade flatlined as milk market traders take a wait-and-see approach to American tariffs, industry analysts say.

The latest session of the Global Dairy Trade stayed in neutral gear overnight, remaining at $US4245 ($A6676) per tonne, with the whole milk powder category posting a negligible gain of 0.2 per cent to sit at $US4052 ($A6372) per tonne.

The biggest change in the latest GDT session was mozzarella, which surged by more than five per cent to reach $US4704 ($A7397) per tonne.

Bendigo Bank Agribusiness senior insights manager James Maxwell said the Trump administration’s recent application of tariffs on Canada, Mexico, China and the European Union had led to dairy trade being placed in a holding pattern.

“The latest Global Dairy Trade event was dead flat — that’s the first time that’s happened in a couple of years. That really speaks to the uncertainty over American tariffs and their trading relationships at the moment,” Mr Maxwell said.

“Broadly speaking, the supply and demand fundamentals for Australian dairy are reasonably good at the moment. These tariffs are currently creating volatility but once a trading equilibrium is found, we’ll get a better picture of what the Australian dairy farmgate is going to look like for next season.”

US President Donald Trump has implemented tariffs on a range of nations since taking office in January. (Photo by Jim WATSON / AFP)

Mr Maxwell noted the New Zealand farmgate, while structured differently to Australia, had surged by more than 15 per cent this season as Australia’s farmgate fortunes had barely moved the needle.

Bulla was the most recent processor to step up this season, with a farmgate rise of 20 cents per kilogram milk solids in February.

Australia’s big three processors — Bega, Fonterra and Saputo — all stepped up prior to Christmas, while most medium-sized factories kept the pricing status quo throughout the current financial year.

South Australian Dairyfarmers Association president Robert Brokenshire said farmgate prices in SA, Victoria and elsewhere were below the cost of production.

“South Australia’s dairy regions are experiencing a one-in-100-year drought. I understand a big part of Victoria’s dairy producing regions are also very, very dry,” he said.

“That means higher and higher prices for feed. Even if we got to $8.70 per kilo milk solids on average, and we’re not close to that at the moment, that would barely cover the cost of production. We need significant step ups now and opening prices with a nine in front of them next season.”