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.
As SMP stockpiled in European warehouses over the years dwindles, prices are on the rise.
Last week’s Global Dairy Trade (GDT) auction saw SMP price rise 3.3% to US$3017/tonne, the highest level in five years.
In August 2015, SMP prices slumped to US$1419/t: around this time last year, SMP was fetching only US$1965/t.
Open Country Dairy chief executive Steve Koekemoer has told farmer suppliers that over the past few years we have seen SMP prices struggle due to the high stocks produced in the EU.
“If you recall, they were stockpiling for some time which held prices down,” he writes in the company’s monthly newsletter Talk Milk.
“These stocks have been worked through and it seems as manufacturers have directed milk away from SMP into other product mixes there is now a shortage.
“Buyers have realised this recently and helped SMP prices reach the highest level seen in five years.”
Open Country has not traditionally been a big SMP producer.
However, Koekemoer says with the new upgrade at Awarua coming on line in March next year, it will be able to market a competitive SMP offering.
