Whole milk powder prices rallied at the GlobalDairyTrade auction, showing stronger than expected gains, although prices for other dairy commodities were more muted.
Milk Prices at GlobalDairyTrade, the auction site run by New Zealand dairy giant Fonterra, rose by 3.8% from the previous session, held two weeks ago.
And prices for whole milk powder, which is the world’s most important commodity milk product, were up 7.5%, to their highest level in three months.
Prices for skimmed milk powder rose by just 0.3%, while prices for cheddar cheese fell by 3.9%.
‘Strong increase’
“This was a strong increase for whole milk powder,” said John Lancaster, dairy analyst at FC Stone, adding that it was “a little bit higher than we were expecting”.
But Mr Lancaster warned that it was “hard to read too much into a single auction”.
Global dairy markets still remain marked by heavy production, and sluggish demand.
Resilient New Zealand output
Production in New Zealand is the top dairy exporter in the world, has remained resilient despite the fact that most farmers are operating at a loss.
“There’s strong milk production coming out of New Zealand,” said Mr Lancaster. “The expected falloff hasn’t really happened.”
“They had been looking at a 6% drop, now it’s looking at about 3%,” he said.
US, EU volumes still heavy
Production in Europe has also been strong, after the end of a milk quota system last year, Mr Lancaster said, while the US is still seeing “reasonable milk volumes”.
“There’s no shortage of milk,” he said.
And demand remained linked to oil price, as many oil exporters are also key milk importer.
“Low oil price has an impact on what they can afford to pay,” said Mr Lancaster, adding that “a strengthening macroeconomic environment” would be supportive for demand.
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