Strong demand for skim milk fails to stem global dairy price drop

Average prices fell slightly in the GlobalDairyTrade (GDT) auction held overnight. This follows a 2.7% rise in the previous auction – the first since February.

Prices had been expected to continue to firm after Fonterra’s revised domestic production outlook for March, issued yesterday, showed annual output will be down on last year, though the estimate of 1.5 millon kilgrams of milk solids for the year to May 31 is an improvement on the previous estimate of 1.48m kgMS.

"New Zealand product pricing tends to wane over the coming weeks as we move into our seasonal production hiatus and sentiment trails off as the focus shifts to the Northern Hemisphere," Rabobank dairy analyst Emma Higgins says..  

The GDT index fell 1.1%, with the most dramatic change being a 10.5% drop in the average rennet casein price to $US4024 a tonne.

A total of 19,508 tonnes was sold to 97 winning bidders out of 150 participants in the 14-round auction. The average price of all product was $US3465/t compared with $US3587/t a fortnight ago.

The average price of the benchmark whole milk powder (WMP) – which makes up about half of the total product offered – declined 1.5% to $US3231/t while skim milk powder (SMP) was in demand, rising 3.6% to $US1999/t.

"An indication of a little more product than previously expected being available before the end of the season may have meant buyers were less willing to pay more to secure whole milk powder at this event," AgriHQ dairy analyst Amy Castleton said. "Fresh skim milk powder has been difficult to get hold of globally so buyers seem to be willing to pay for it right now.”

Skim milk premium
Ms Higgins says a late spring in the northern hemisphere has delayed production and resulted in tighter fresh inventories for SMP with a price just shy of $US2000/t.    

"New Zealand product is still priced at a premium over European-sourced SMP,: she says. "And while demand for fresh is strong, old EU SMP stocks are seeing some clearing movement." These must be removed by the end of May. 

In other categories, cheddar was the only other big mover, rising 3.1% to $US4024/t. Lactose rose 0.6% to $US616/t and buttermilk powder rose 0.5% to $US1990/t.

Anhydrous milk fat fell 1.9% to $US6032/t and butter was unchanged at $US6032/t.

The next auction is on May 15.

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