After recording a slight lift at the beginning of March, the GDT returned another negative result on Tuesday after the benchmark dairy index lost almost 3% at this week’s auction in New Zealand.

From the six auctions held since the start of the year, this is the fifth fall, reflecting the bearish sentiment in dairy markets at present.

At Tuesday’s auction, the index fell by 2.9%, with an average product selling price of $2,190/t. The price of whole milk powder (WMP), the key dairy commodity traded, fell by almost 1% and remains below the $2,000/t mark.

Futures

Futures prices for WMP, a proxy for the performance of the biweekly GDT, had actually pointed towards a steady or positive performance which did not materialise.

Aside from price gains for butter milk powder (+6.4%) and lactose (+0.8%), the average price of all other dairy commodities recorded losses this week.

Skimmed milk powder (SMP) prices fell 2.5%, average butter prices lost almost 3% and cheddar prices were down almost 6%. There were also losses in the average price of casein (-7%) and anhydrous milk fat (-6.5%).

Oil prices

Even the price of Brent crude oil, which had shown some stability last week, slipped back below the $40/barrel mark this week after Iran said it would continue to drive production.

There were hopes the oil market had found a floor at $40/barrel last week, which would be positive for dairy.

Since oil prices first began to fall in 2014, the buying power of oil-dependent economies has been severely curtailed.

Realistically, oil prices will need to return to somewhere in the region of $60 to $80/barrel to stimulate strong demand from these markets once again.