GlobalDairyTrade slump but EU dairy market steady

Dairy prices fell sharply at Tuesday’s GlobalDairyTrade auction.

The increasing 2017 market pressure, particularly in the milk powders sector, mainly due to sluggish demand, was reflected in slumps of 12.4% in prices for whole-milk powder, and 15.5% for skim milk powder.

The powder prices fell to their lowest levels in four-and-a-half months (whole), six-and-a-half months (skim).

However, the falls were at least partly due to improved recent New Zealand milk intakes, bringing a 49% increase in the volume of skim milk powder in the GDT auction, and 6% extra whole milk powder.

Despite the reduced prices, most of the product offered was traded, and the average GDT Price Index fell only 6.3%.

Meanwhile, FrieslandCampina, the Dutch-based co-op ranked at No 6 in the world for dairy turnover, has forecast the prices for basic dairy products continuing to fluctuate around the year-end 2016 and beginning of 2017 level.

And no significant changes in global consumption trends or big shifts in global trade patterns during 2017 were seen last week by Arla, the Danish-based co-op ranked No 7 in the world.

Announcing annual results, Arla chiefs said prices going forward depend on “how supply will respond to the increasing market milk prices, and how fast this supply recovery will take place”.

The EU average farm-gate milk price reached 33.4 c/kg in January, according to the EU’s milk market observatory.

At the March COPA Milk Meeting, IFA National Dairy Committee Chairman Sean O’Leary said farm organisations across Europe reported significant milk price increases, and continued restrained output.

Commenting on the GDT auction price slump, he said the auction sold only 12% of all powder and less than 5% of all butter traded internationally in 2016.

“While it clearly influences buyers and sellers, it accounts for a small and decreasing portion of actual global trade, and is less important to us than EU exports and trade.”

Meanwhile, Ireland’s biggest milk processor, Glanbia, has moved to help dairy farmers through periods of price volatility, by extending the Glanbia MilkFlex Fund for the rest of 2017.

Since its arrival in May 2016, the fund received loan applications totalling €43 million, and has provided loans averaging €100,000.

It has inbuilt adjustment of repayment terms in line with movements in milk prices and seasonality. The standard eight years loan term may be extended by up to two years during milk price volatility.

The interest rate charged is a variable rate of 3.75% above monthly Euribor cost of funds (Euribor floor of zero).


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