Global dairy prices rise again, hinting at rebound

Prices on the Global Dairy Trade auction rose 1.1% this week, another sign that markets could be steadying.

The sixth successive increase means the key indicator has now recovered 34% since mid-December.

Prices for cheddar, butter, buttermilk powder and skim milk powder values all increased, but whole milk powder dropped back slightly.

And the auction average remains just under one-third lower than a year ago, at US$3,374/t (£2,214/t).

“When auction markets get too big, instead of [creating] transparency in the setting of market prices they become market drivers themselves.”
Nick Holt-Martyn, The Dairy Group

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The amount of product sold fell once again, leaving analysts cautious about whether the GDT results marked a real recovery.

The Dairy Group’s Nick Holt-Martyn said the 46% cut in tonnage over the past six sales suggested supply to the auction was driving prices, not the wider market conditions.

He said this could be driven by the rapid growth of the GDT over recent years.

“When auction markets get too big, instead of [creating] transparency in the setting of market prices they become market drivers themselves and their internal supply/demand dynamics increase volatility,” Mr Holt-Martyn said.

Other dairy market factors from the past week were:

• UK wholesale prices also increased in February, according to DairyCo’s monthly report. Bulk cream values rose 19% to £1,170/t, skim milk powder jumped 19% to £1,700/t, while butter and cheddar also recorded rises.

• The actual milk price equivalent (AMPE) rose 21% to 23.6p/litre in February, while the milk for cheese value equivalent (MCVE) was up 13% to 25.9p/litre.

• UK milk production continues to ease back compared with last year’s high levels. Daily deliveries in the two weeks to 21 February were 0.9% lower than in 2014.

• The milk market observatory’s latest outlook expects EU production to fall 3% in the first quarter of 2015. Countries such as the Netherlands and Ireland are reining in production to avoid superlevy fines for going over quota. Once the limits are off, the EU predicts output to rise 2.5% between April and December.