Dairy prices took a sharp dip in the latest Global Dairy Trade (GDT) auction, recording a significant 4.1% drop across all categories. The trade was held overnight on 2 July, the auction saw its largest fall of the year, continuing a streak of four consecutive events with declining prices.
Meanwhile, the volume surged to 25,705 metric tonnes, a notable increase from 15,209 metric tonnes in the previous auction.
Whole Milk Powder Takes the Largest Hit
Whole milk powder, which heavily influences Fonterra’s farmgate milk price, saw a 5.1% drop to US$3859/MT. This follows a previous 2.1% decline, compounding concerns for both farmers and dairy processors.
“Whole milk powder, which has the biggest impact on Fonterra’s farmgate milk price, recorded the largest drop, plunging 5.1%, to an average of US$3859/MT,” the auction summary stated.
Butter and Anhydrous Milk Fat See Steep Declines
The price downturn spread across various dairy products. Butter fell 4.3% to US$7522/MT, while anhydrous milk fat dropped 4.2% to US$6928/MT. Cheddar, which had risen 5.1% in the prior auction, reversed its gains, falling 2.8% to US$4860/MT.
Mozzarella, however, saw the smallest movement, dipping just 0.2% to US$4790/MT, making it the most stable commodity this auction.
Lactose and Buttermilk Powder Show Strong Gains
While the majority of dairy products faced price drops, two exceptions posted gains. Lactose managed a strong recovery, rising 4.2% to US$1375/MT after a 3.6% fall in the previous auction. Buttermilk powder saw the most remarkable growth, soaring 9.3% to US$3124/MT after its absence from the prior event.
Fonterra Maintains Milk Price Forecast Despite Declines
Fonterra has maintained its milk price forecast for the 2024/25 season despite the ongoing auction declines. The forecast range remains at $9.70 to $10.30 per kilogram of milk solids (kgMS), with a midpoint of $10.00. ‘
Its opening forecast for the 2025/26 season stands at $10.00 per kgMS, within a broad range of $8.00 to $11.00 per kgMS.
Economic Impact of Dairy Price Decline on New Zealand
The outcome of the most recent auction could add further strain to New Zealand’s dairy-centric economy. With exports being a key component of national revenue, sustained price downturns could impact fiscal planning and trade negotiations. This might prompt policymakers to adopt a more conservative stance amidst increasing global market volatility.
Farmers, investors, and agribusiness leaders will closely monitor upcoming auctions for signs of a price bottom or further declines.
Attention will be focused on whether Whole Milk Powder (WMP) prices stabilise, as well as the implications of rising volumes on global demand. The latest auction showcases the delicate balance between global supply, demand, and market sentiment.