International milk prices start to strengthen

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This week’s Global Dairy Trade (GDT) event, hosted by Fonterra Co-op in New Zealand, saw prices rise by an average of 4.9%, relative to the auction held a fortnight earlier.

This was the second consecutive sale at which a strengthening of marketing returns had been recorded. The first event of the New Year saw GDT increase move forward by an average of 2.2%.

At this week’s event whole milk powder prices increased by 5.1%; skimmed milk powder by 6.5%; butter prices by 8.8% and cheddar cheese prices by 5.5%.

Fonterra has reported that December milk production in New Zealand was significantly down, 6% compared to December last year. Subsequently, Fonterra reduced forecasts for milk collection to 16,333 million litres for the 2017/18 season. As a result a feeling of unease within the marketplace has put upward pressures on prices.

Commenting on the latest GDT result, Ulster Farmers’ Union (UFU) Dairy Chairman William Irvine said: “The EU has a significant amount of skimmed milk powder in its stores. If these stores were to be opened, this would have an impact on price. This is not an overnight development, as the last auction a fortnight ago had risen by 2.2%.

“Whilst significant, it is a reflection of adverse weather in New Zealand. Closer to home, Dutch Dairy Board has seen stabilised prices and for some products, improved returns. Also, there has been an improvement in the Mozzarella price, up €100/tonne last, illustrative of good demand. The UFU Milk Price Index has risen by 1.07%.”

Holstein UK’s John Martin said: “New Zealand production levels are currently unstable but, over the calendar year, I think production will be up overall. Demand continues to increase with Chinese buying a help.

“EU production is up slightly overall in 2017 with large increases recorded at the end of the year.”

He added: “We remain the largest exporter of dairy but global demand is currently keeping pace with production. However, there is no room for sustained large increases in production as the EU intervention options have changed with no soft landing.

“I do believe that a production reduction tool will be used within the next 12 months if the supply trend continues in the EU, as it has in the last quarter of 2017.”