Dairy Australia’s John Droppert said last week’s 3.9 per cent drop in the Global Dairy Trade auction price to $US2969 a tonne reflected the weakening in global markets which had characterised the past few weeks.
“This does take some of the headroom out of the farmgate price forecasts for 2017-18, (for example) there is likely to be less room for step-ups,” he said.
“Fortunately, this is occurring after the spring flush, and most manufacturers don’t seem to have too much stock around that hasn’t been sold.”
This would limit the impact.
The GDT results include: butter prices dropping 2.3 per cent to $4474/tonne, cheddar down 7.9 per cent to $US3389/tonne, whole milk powder down 2.5 per cent to $US2755/tonne and skim milk powder down 4.8 per cent to $US1675/tonne.
Mr Droppert said there were a few upside influences to dairy markets, including current dry conditions in New Zealand that could limit production and the possibility of more Chinese buying from the middle of next month. He said there had been less buying by China than usual in the later months of the year and “this could mean we see a bit of an uptick from mid-January onwards, but it could also reflect the extra activity in July-August”.
”The other potential upside is that these lower prices could drive extra demand as buyers look to restock,” he said.
Downside influences include EU milk production growing at about 5 per cent and US growth at 1-2 per cent, Mr Droppert said. The US is also looking to boost exports and he said NZ would probably end up with more milk than forecast. He said the extra supply was a concern. “All of this milk has to go somewhere.
“Then there’s the European SMP stockpile — they still have to get rid of it and still don’t know how to.”