Global Dairy Trade: International trade flatlines due to soft China demand

International dairy trade is barely moving at the moment — meaning Australia’s farmgate is in pricing limbo. Here’s why.

Australia’s farmgate fortunes remain in limbo with the latest Global Dairy Trade auction barely moving the needle in overnight trade.

The headline figure of the Global Dairy Trade index moved a minuscule 0.4 per cent to reach $US3837 ($A5696), with milk powder prices going backwards.

The latest trading session was the first since a mammoth 6.9 per cent drop in the headline figure a fortnight ago, quashing expectations of step up at the Australian farmgate.

Whole milk powder dropped 1.6 per cent in this week’s trading session to an average of$US3142 ($A4644) per metric tonne while skim milk powder dipped 1.1 per cent to an average of $US2566 ($A3809) per metric tonne.

Cheddar was one of the few dairy categories to rally in the latest GDT sale, rising 6.2 per cent to sit at $US4217 ($A6260).

Rabobank agricultural analyst Emma Higgins said peak dairy season in Australia and New Zealand along with sluggish Chinese demand were the twin factors weakening the GDT index.

“Things are still quite challenging within China and some of the data still points to this as well,” Ms Higgins said.

“China is critical when it comes to export volume — whether it’s beef, whether it’s sheepmeat or whether it’s dairy.

“The price weakness in the (milk) powder space can be explained, somewhat at least, by seasonality. This is the point of time in the calendar year where we see more volume being added to the GDT platform, particularly for powders.”

With the new season starting three weeks ago, 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.

Following the first trading session of the season, Maxum Foods procurement chief John Hallo said Chinese demand for Australian dairy would stay weak for the coming months due to economic headwinds.

He said it was too early to determine what impact weaker international demand would have on farmgate prices locally.