Global Dairy Index Drops 6.3%

Global Dairy Trade Index Drops 6.3%

The Global Dairy Trade (GDT) index dropped 6.3% at last night’s auction, with several grades of milk powder failing to move from their opening prices. 

The result confirms that Fonterra’s decision to hold their milk price forecast for the current season at $6/kg milksolids (MS) was the right one.

Movements in commodity prices in the later part of the season have a smaller impact on the price farmers are paid for their milk because of the lower volume of product being traded at this time of the year.

Normally at this time of the season the volume of product being offered on GDT starts to fall away but improved milk intakes in recent months mean Fonterra has more product available to sell than previously anticipated.

AgriHQ dairy analyst Susan Kilsby said farmers will be disappointed with last nights result.

“To see prices falling again before the market has fully recovered will be a disappointment to farmers. While one poor result doesn’t have a huge impact on the milk price it will be difficult for prices to recover quickly while there is surplus product available.”

“Last night’s result shows just how tightly balanced the market is – there just isn’t the depth of demand in the market to absorb any extra product at the moment.”

The NZX Dairy Derivatives market had anticipated a weak GDT result but the prices attained overnight were even lower than expected. Going into the auction futures market participants had priced in a 8% fall in WMP and a 12% fall in SMP for product supplied by Fonterra. However the results were even weaker than this.

Regular grade WMP for shipping in May traded at US$2,695/t, 14.7% below the price achieved for this grade of product at the previous event.

Medium heat SMP supplied by Fonterra with a May shipping date also failed to lift from its opening price meaning buyers were able to secure this product at US$2,195/t. While that is 15.4% less than what they would have paid a fortnight ago it is still more than the current market price for equivalent product in the European and United States markets.

Milkfat products did a lot better. Demand for butter and anhydrous milkfat (AMF) has been very strong throughout the season driven by dietary trends towards natural products and away from synthetic products such as margarine.

Regular grade AMF was priced at US$5515/t just 0.8% less than at the previous auction, while butter recorded a 2.3% lift in price with unsalted product with a May shipping date making US$4,700/t.

Scroll to Top