Global dairy market blip surprises industry

The Global Dairy Trade auction on October 17 will be closely watched by all in the dairy industry, for signs of a weakening global market, following a surprise 2.4% fall in the overall GDT price index at last Tuesday’s auction, writes Stephen Cadogan.

Futures markets had anticipated a strong lift in prices on Tuesday.

Instead, the global dairy industry was surprised by the biggest index fall in more than six months.

The GDT auction on October 17 will help to explain if Tuesday’s price drop was due to the large volume of product on offer, which was the highest in more than a year.

The 37,990 tonnes sold at the auction was 11.4% up from the previous auction on September 19.

However, some market analysts said the result may point to weaker demand and stronger supply.

However, supply has been held back by New Zealand milk production in August falling 2% behind last year’s level, due to recent wet weather.

This trend will continue unless the country’s weather conditions improve soon.

Combined world milk production grew by 0.17% in the January to July period, compared to 2016, mainly fuelled by the US.

Global exports expanded in July by 6% (milk equivalent).

China led the growth in global imports, buying 27% more than in 2016, while Southeast Asia has increased imports 12%.

According to the European Commission, continuing strong demand in China and South East Asia would help to absorb some of the increasing volumes of dairy product.

EU exports have performed well, especially of cheese and skim milk powder, but are getting increasingly difficult, due to the stronger euro and weaker dollar, and competition from the US and New Zealand.

The EU is currently the most expensive source for dairy commodities.

How these trends are moving may become clearer in the Global Dairy Trade auction on October 17, which will be of particular interest to the industry in Ireland, which leads EU milk production growth in 2017, with a 7.4% increase so far this year.

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