Dairy commodity price fall pushes back recovery hopes

Dairy commodity prices fell 7.4% at Tuesday’s (2 February) Global Dairy Trade online auction.

This took the index down to its lowest level since September 2015, and with output still rising in some significant producer countries, pushed back hopes of a price recovery well into the second half of this year.

Two of New Zealand’s largest dairy co-operatives recently cut their farmgate milk price forecasts for 2015-16, blaming high EU production weighing on the market.

Fonterra cut its forecast price by almost 10% to about 14p/litre, while Westland is at 14-15p/litre.

AHDB Dairy reports milk production in all five of the world’s key exporting regions (EU28, US, NZ, Australia and Argentina) was down slightly in November 2015.

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Their annual milk production equivalent was just 0.4% lower than in October, although up slightly on September.

November was the first month in more than two years that the production equivalent fell month-on-month in all five regions, including the EU, said AHDB Dairy.

However, the drop recorded for the EU was largely caused by exceptionally high production in October rather than particularly weak production in November.

December production figures for NZ show a small increase,  but was offset by a reduction from the US.

The volume sold at the GDT was up slightly from the previous sale at almost 24,500t, but lower than the 28,000t traded at the corresponding sale last year.

The overall average price at the GDT sale was US$2,276/t (£1,580/t), with the largest falls seen in whole milk powder, butter, butter milk powder and anhydrous milk fat.