Global Dairy Trade: Opening price forecast to fall

The international milk market has fallen to its lowest levels since late 2020, casting a shadow over opening prices in Australia.

International dairy prices have crashed to the lowest levels since November 2020 as buyers tighten their purse strings.

The headline figure on the Global Dairy Trade index collapsed by 4.7 per cent overnight – the fourth consecutive decline since February.

Whole milk powder, which peaked in March 2022 at $US4757 ($A7026) per megatonne, plunged 5.2 per cent to an average of $US3053 ($A4509) per megatonne.

In some slightly good news for the Australian farmgate, the cheddar index was the only commodity indicator to rise overnight, off the back of reduced trade.

Fonterra Asia Pacific chief executive Judith Swales told New Zealand radio today that the GDT was likely to remain sluggish at future trading sessions.

Fonterra boss Judith Swales says the dairy buyers are “really cautious” at present

“We did see a downward movement across most commodities, apart from cheddar cheese,” Ms Swales told Newstalk ZB.

“Uncertainty continues to be a factor for price volatility. Buyers are really cautious.

“(If you) look at the wider macro-economic picture, we think it’s likely to continue to keep weighing on buyer sentiment, particularly in the short term.”

Across the board, dairy commodity prices have fallen by about 35 per cent since April last year, with Australia’s biggest export earners cheddar down 37 per cent and skim milk powder down 42 per cent.

Australia’s processors have been reluctant to provide opening prices for the 2023-24 season so far, a stark contrast to this time last year when several had already entered the race.

Westpac senior economist Satish Ranchhod said the international price index was likely to rise in the coming months but the short-term outlook was downcast.

“Over the year, we expect that rebounding Chinese dairy demand and disruptions to New Zealand supply following recent storms will lead global dairy prices higher,” he said.

“But for now, some key buyers are well-supplied and we anticipate that as they work through these stocks, prices will remain soft.”