Dairy Trends: another negative week for dairy trade

There was further downward pressure on the spot market for dairy products this week, with European traders selling whole milk powder (WMP) for €3,190/t, which is down €160/t on last week.

This follows on from last week’s Global Dairy Trade (GDT) auction which saw WMP fall in value by 10.9%.

What followed on Friday was a further price cut announcement by Fonterra, lowering its expected milk price range.

It announced on Friday that it expects the farmgate milk price to be between $6 and $7.50 per kilo of milk solids (kg MS) with a mid-point of $6.75/kg MS - down from its forecast in early August of $6.25 to $7.50/kg MS.

The new midpoint forecast price, when converted to cent per litre, is 23.9c/l at 3.30% protein and 3.60% fat.

New Zealand is really exposed to China, as Fonterra was sending up to 40% of its output there. With a huge reduction in demand from China, it needs to find a new home for this product.

Birth rate in China is lower than expected and this is also affecting demand, along with an economy under pressure.

So all other exporting nations - including and particularly Ireland - will see stiffer competition in their markets.

Butter and skim milk powder (SMP) also dropped this week but to a smaller extent. All eyes are now on what happens to global supply. It looks likely that producers around the world will experience pain in terms of milk price. Farmers in the US are already there, with prices for Class III milk down to $13.77/cwt (28.9c/l) – the lowest in years.