GDT auction first test of end of EU quotas

Farmers will get an early signal next Wednesday of the impact of the end of EU milk quotas on global dairy markets.

The first day that EU farmers are free to produce as much milk as they want is also the day of the next GlobalDairyTrade auction for internationally traded commodity dairy products.

The auctions organised by the Fonterra dairy co-ops occur twice a month, and the last trading event, on St Patrick’s Day, was the first of seven auctions in which dairy product prices decreased, after a mini- recovery in world milk prices.

On March 17, the average product price slumped 8.8%.

Although the quantity sold on March 17 was only half of the supply of 12 months previously, the price was 31% lower — indicating how milk markets have slumped over the past year.

However, prices may be affected less by the end of EU quotas than the latest trends in the New Zealand milk supply, and the dairy demand trend in China.

Figures are expected in New Zealand today for the impact of dry weather, expected to hold annual milk production at around the same level as last season.

In China, the annual report from the country’s top milk producer, China Modern Dairy, has indicated that a supply surplus which helped to halve world dairy prices last year may now be shrinking.

Chinese demand for high-end quality raw milk will exceed supply in the long run, according to the China Modern Dairy group.


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