Global dairy commodity prices fell for the sixth consecutive sale at Fonterra’s latest auction, with the weighted average dropping by 1.1% to US$3950/t (£2,325).
Prices are now almost 22% lower than in early February, with supplies continuing to run well ahead of last year. GlobalDairyTrade sold 38,174t on Tuesday (6 May) – 20,937t more than the same time last year when prices averaged US$4,597/t.
Falling global market returns were starting to affect UK producers and further price cuts were likely this summer, warned Nick Holt-Martyn, director at The Dairy Group. “When the supply of the main dairy blocks (EU, US and NZ) exceeds around 700m litres a day then markets weaken to correct supply. Milk supply has exceeded 700m litres since October 2013, so it was only a matter of when prices would fall.”
Looking further ahead, a forecast return to El Nino conditions in the Pacific over the next six months could increase the risk of drought around the world, he added. Combined with lower prices, this could reduce milk production, leading to better market returns in 2016.