Global dairy prices suffer latest setback

Global dairy prices have suffered yet another setback, as supplies around the world run high.

The averaging winning price on the Global Dairy Trade auction slumped 3.5% to US$2,515/t (£1,657) on Tuesday (5 May).

Prices are back to where they were at the start of December, with four falls in a row wiping out any tentative recovery.

See also: Farming income falls after commodity prices crash

Skim milk powder values fell 7.5% to US$2,048/t (£1,349) and whole milk powder was also down 1.8% to US$2,386/t (£1,571).

Cheddar was the only product offered to record a rise, with prices jumping 9.1% to US$3,012/t (£1,984).

Supplies to the auction also keep on building, with the 27,000t sold 7% higher than at the last sale.

A DairyCo report said global milk oversupply was the main reason why prices remained low.

Milk in Australia, New Zealand, the US and EU in January and February were all above the three-year average.

“How global milk supplies develop over the coming months will be key to any recovery in global commodity market prices,” the report said.

Last week, New Zealand dairy giant Fonterra dropped its forecast farmgate milk price for the 2014-15 season by 20c (10p) to NZ$4.70/kg of milk solids (£2.34).

This works out as the equivalent of about 18p/litre, after the forecast divided is included.

The co-op’s chairman, John Wilson, said he had confidence in the long-term fundamentals of international dairy demand, despite the imbalanced market.

“This reduction will affect cashflows for our farmers, who will need to continue exercising caution with on-farm budgets,” he said.

“Our farmers are already managing very tight cashflows.”

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