It was a poor week on the dairy markets scene this week as the Global Dairy Trade (GDT) auction posted another negative result, with the index down 2.8%, following on from the 2.3% reduction at the last auction.

There was similar negativity on the European spot market, with butter dropping in price by €140/t, whole milk powder (WMP) dropping by €75/t and skim milk powder (SMP) dropping by €115/t.

At the GDT, the largest drop was seen in powders, with SMP dropping by 4.8% and WMP dropping by 4.2%. A tonne of skim is now worth €2,311/t on the GDT, while a tonne of WMP is worth €2,886/t.

At that price, WMP at the GDT is well below the €3,565 on the European spot market. All in all it’s not a great picture, particularly as we approach the peak milk supply period in Europe and North America, with a flush of milk to come.

It’s worth noting that the volume traded at the GDT was just under 20,000t of product, which is the lowest amount traded in about three years.

Reason

It’s difficult to identify the reason for the fall in confidence, with no apparent major change in supply or demand. That points to traders taking a position and maybe the recent rally in prices was driven by short term demand by traders to fill positions.

At the GDT, WMP has lost €293/t since early February, and the futures prices are all back going as far out as next August. So while milk prices are rising in Ireland and across Europe, the market is still shaky and even more volatile than before.