On the world market, US quotes for butter and cheddar showed further improvement this week as they increased by 2.9% and 2.3% respectively, benefitting from strong domestic demand.

In Oceania, there were major declines across the board for all dairy products.

Skimmed milk powder (SMP) quotes fell by more than 12%, followed by cheddar, which fell by over 9%. Whole milk powder (WMP) and butter fell by 9% and 7% respectively.

EU prices for butter improved a marginal 0.3%, while quotes for WMP were back 2.5%.

On the demand side, China is the world’s largest dairy importer, despite a recent easing in demand.

However, China stunned the global financial markets this week by devaluing its currency (the yuan) by 3.5%, sending share and commodity prices into reverse. A weaker yuan, coupled with the slowing growth of the Chinese economy, will have a negative impact on the buying power of Chinese dairy importers.

While it’s still early to tell the impact that the devaluation of the Chinese currency will have, next week’s GDT auction will be watched closely, particularly as the next seven auctions account for a significant chunk of annual (GDT) WMP sales.

Ireland

Closer to home, Ornua announced yesterday (Wednesday) that its product purchasing index (PPI) for the month of July was 91.8 points, down 3.8 points on the June index.

At a PPI of 91.8, this would equate to a July milk price of 26.7c/l including VAT and leaves the index at its lowest ever point since its base year in 2010.

The PPI has now decreased for four consecutive months since it stood at 100 points in March and its decline reflects the deterioration in the wider global dairy market.