International dairy markets set to strengthen

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The NZX Dairy Futures Market in New Zealand is predicting that international prices for whole milk powder, skimmed milk powder and anhydrous milk fat will increase by 5% between now and the end of 2015.

And this trend may well be reflected in the returns generated by the Global Dairy Trade (GDT) hosted by the Kiwi milk processor Fonterra throughout the same period.

Meanwhile, UK wholesale spot prices saw some uplift in September, due to a variety of factors. This has led AHDB Dairy analysts to believe the bottom of the market has been reached.

“There was generally more interest and positivity in the market with buyers coming back off summer holidays and after recent Global Dairy Trade auction increases,” said an AHDB spokesman.

“As well as these factors, Sterling weakened against the Euro, pushing prices up. However, production globally remains high and exactly what stock levels exist globally is unknown.”

Average cream prices began September in the low £900s before picking up as the month went on. Prices were reported to have ended the month around the £1,000/tonne mark. There was more interest in the market than there was in August and generally buyer interest was relatively consistent across different price levels over the month.

Butter prices followed a similar pattern to cream but the two products were disconnected, resulting in more of a return for making cream than butter. Recent GDT results has left the auctions average butter prices above EU levels which has added some upward pressure to prices.

UK skimmed milk powder prices followed prices on the continent with some slight upward movement. This increase took average prices above intervention levels. The UK mild Cheddar market remained stable in terms of prices over the month.

Although prices had not moved up yet, sentiment towards the latter stages of September was more positive with buyers increasingly interested in negotiating longer term deals.

The current situation has been referred to as ‘a game of cat and mouse’ between buyers and sellers with regards to pricing, due to more signs of positivity. The market continues to operate in two distinctive segments – the top end product made for a higher-value specification and the lower end used in manufacturing.