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GlobalDairyTrade prices drop for third consecutive event while Asia's demand for IMF provides hope for price rises

November 18, 2015

Commodity milk markets have fallen once again with GlobalDairyTrade auction prices dropping for the third event in a row.

While prices remain 35% above August lows, a decrease of 7.9% from the previous event was recorded.

Whole milk powder provided the sharpest decline, with prices falling by 11%.

This comes off the back of news from Fonterra that New Zealand milk output was down 4.2% in October, the peak month for output, with a forecast drop of at least 5% over the 2015/16 season.

However, Tom Bailey, Rabobank dairy analyst, notes, “In order for the market to recover we need to see European and US production slow. New Zealand cannot correct this market alone.”

Despite this, farmers in Europe and North America have seen less incentive to cut production with Dutch dairy co-operative FrieslandCampina lifting milk prices due to a stronger market for dairy products in Germany.

There is hope that China’s announcement that it will be bringing its one-child policy to an end will increase milk prices due to an increased need for infant milk formula, with estimates that there will be a growth demand of 7-8% for the formula over the next five years. However, with IMF only accounting for around 4% of dairy consumption in China, Bailey suggests the impact on dairy prices via this channel will be insignificant.

 

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