Close-up of milk powder on a spoon© Food and Drink/REX/Shutterstock

The Global Dairy Trade (GDT) index, an indicator of market sentiment fell for the first time in seven auctions, down 0.8% to average US$3,434/t (£2,723/t).

The drop was largely down to a 3.3% fall in the auction’s most-traded commodity, whole milk powder (WMP), which averaged $3,022/t (£2,396/t).

Cheddar, lactose and rennet casein values also lost ground, dropping by 3.8% to $4,121/t (£3,268/t), 11.1% to $869/t (£689/t) and 8% to $6,104/t (£4,840/t) respectively.

See also: World milk prices up 63% on lows of May 2016

However, fats prices continued to burgeon, with anhydrous milk fat (AMF) up by 4.4% to average $6,885/t (£5,460/t) and butter increasing by 2.9% to $5,768/t (£4574/t).

The AMF average auction price has now increased by 24.5% since January, with butter prices 31.6% higher than at the turn of the year. 

Despite the fall, the auction index was still at its second-highest level since June 2014 and 56% higher than the same auction 12 months ago.

“The drop in WMP was a concentrated fall as it has now dropped at the past two auctions by about the same amount – about 3%,” said AHDB Dairy senior analyst Luke Crossman.

“But it’s still surprising because WMP in Europe has increased by a lot.”

He added the fall in cheddar prices at the auction was also a strange one – but said it could just be a rebalancing of the market following quite a big increase at the auction a fortnight ago when cheddar increased by 14.5%.

Butter prices here to stay

“It’s another significant increase for butter and it appears these prices will stay for a while,” he said.

“The increase in [skim milk powder (SMP)] prices is another positive sign especially considering the high level of EU stocks at the moment.

“Overall, long-term demand for SMP and WMP is falling off as buyers are hesitant of how quickly market can move.”