Global Dairy Trade: Prices decline faster than expected
Excess milk supply has softened international dairy rates, but trends with the potential to change that are now emerging.
International dairy trade is on a downward trajectory with the seventh consecutive drop in the overall market indicator.
Prices across the board fell 2.9 per cent to a US$3839 (A$5214) at the latest Global Dairy Trade auction, with whole and skim milk powder indicators particularly weak.
The Whole Milk Powder indicator fell 3.8 per cent and more than US$130/MT (A$177) to an average US$3730/MT (A$5065) while the Skim Milk Powder category dropped 5.2 per cent and US$155/MT (A$224) to an average US$2971/MT (A$4035).
New Zealand agricultural economist Nathaniel Keall said the downward trend had seemingly set it, at least for now.
“We knew dairy prices wouldn’t sustain these heights forever, but prices are falling a bit faster than we’d anticipated,” the ASB economist said in the bank’s market update.
“The fact that prices have continued to fall even as Fonterra has reduced the amount of product on offer clearly shows that the demand and supply balance is shifting in the direction of buyers rather than sellers.”
The downward trajectory of the GDT average indicator started on March 16 with a -3.8 per cent contraction, the first test of the extraordinary March 2 trading boom of +15 per cent.
Since then, seven GDT trading sessions have fallen into negative territory with the worst result on July 6: a -3.6 per cent cut to the average.
“The key question is where prices will find their floor, and on that front we are still positive,” Mr Keall said.
“The surge in (coronavirus) delta variant cases overseas has added a bit of uncertainty into the economic outlook, but we still expect the uptick in global demand and ongoing supply chain issues will keep commodity prices supported across the board.
“And for farmers, the faster-than-anticipated fall in auction prices will be partially offset by a couple of other trends – namely the favourable moves in forward exchange rates over recent months.”
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