Strong production, tested demand send milk prices crashing
Strong global milk production and rebalancing of demand among key buyers has delivered one of the biggest drops in whole milk powder prices in recent years.
Last night’s Global Dairy Trade (GDT) auction saw the price index fall 1% compared to the previous auction. Dairy prices have now fallen on the four GDT events since July.
Whole milk powder price slipped 2% to US$2,884/metric tonne.
In an email to shareholders Fonterra chairman John Monaghan said that the global market was finely balanced at the moment, with both demand and supply increasing but it has the potential to change.
“There is good demand in market at this stage of the season, however, the forecast economic slowdown is likely to increase global unemployment and reduce consumer demand.
“The potential for additional waves of COVID-19 is also impacting the confidence of some of our foodservice customers.”
On the supply side, global milk production has bounced back stronger than expected and volumes in the key dairy production regions of the EU and US are anticipated to be up on last year.
Monaghan says at this early stage of the season, any movement in the market can have a significant impact on the milk price.
“For that reason, we recommend caution with your on-farm financial decisions.”
Key results
AMF index down 0.5%, average price US$3,852/MT
Butter index down 1.2%, average price US$3,334/MT
BMP index up 3.9%, average price US$2,356/MT
Ched index down 0.4%, average price US$3,428/MT
LAC index up 0.8%, average price US$1,314/MT
SMP index up 1.8%, average price US$2,663/MT
SWP index not available, average price not available
WMP index down 2.0%, average price US$2,884/MT
