The GDT index got off to a negative start in 2017 after the benchmark dairy index recorded a 3.9% decline at this week’s auction in New Zealand. The slump in the price of whole milk powder (WMP) almost single-handedly dragged the index lower.

Prices for WMP retreated almost 8% to an average of just under $3,300/t. However, while this may seem like a poor start to the year for milk powders, prices are almost 50% ahead of this time last year.

The main reason for the slump in WMP selling price this week is related to the closure of the tariff-free window available to Chinese dairy import buyers.

All dairy commodities imported by China from New Zealand for the month of January are tariff-free under the free trade agreement between both countries. However, contracts for January-delivered dairy product concluded at last month’s GDT events, meaning there was less firmness at this week’s auction.

Chinese buyers typically import about 15% of all the country’s dairy needs in January alone under this tariff-free arrangement, meaning February tends to be a slower month for demand.

Of the other commodities at this week’s GDT, skimmed milk powder (SMP) prices increased over 2% to an average of $2,660/t. There were also gains in the price of cheddar (+1%), butter (+1%) and buttermilk powder (+5%).

The average price of anhydrous milk fat (-1%), lactose (-3%) and casein (-3%) all posted declines this week.