Dairy Farmers Get No Relief in Latest Global Auction
Category: Dairy
(Wall Street Journal) – International dairy prices fell for the third successive GlobalDairyTrade auction, as concerns about an overabundance of products globally continue to weigh on the sector.
The GDT Price Index, which covers a variety of products and contract periods in the auction, fell for Feb. 2 by 7.4% from the previous auction on Jan. 19.
The GDT Price Index is now off around 20% since its recent peak on Oct. 6, while whole-milk powder prices have fallen 31%.
The GlobalDairyTrade auction is an international trading platform established by New Zealand’s Fonterra Co-Operative Group.
The average selling price was US$2,276 a metric ton.
The average selling price for whole-milk powder was US$1,952 a metric ton, down 10.4% from the prior auction.
The GlobalDairyTrade auction is closely watched, as the GDT Price Index is widely considered a market reference price for dairy products.
Dairy prices have suffered because of subdued demand from important markets, such as China and the Middle East; a glut sparked by Russia’s ban on U.S. and European food imports, and world-wide overproduction partly due to the removal of quotas on dairy production in Europe, which saw the European Union export 6% more skim milk powder in the 11 months to Nov. 30, than in the prior year.
“There is so much more dairy coming out of Europe and that is keeping these prices low, and it is making it look like these prices will be lower for longer, “said Doug Steel, senior economist at the Bank of New Zealand.
Sharp falls in dairy prices are causing concern globally.
Fonterra Co-Operative Group, the world’s largest milk exporter, has slashed what it expects to pay its 10,500 farmer-shareholders. Many farmers now operate below break-even levels. The British farm lobby group National Farmers Union has warned that the low prices will force a large number of dairy farmers in the U.K. to leave the industry.
Dairy prices rebounded somewhat in the second-half of 2015 after the weather phenomenon El Niño didn’t create dry conditions in New Zealand that would have reduced grass that dairy cows feed on. As a result, milk production in New Zealand, the world’s largest exporter of dairy products, hasn’t fallen as quickly as expected and so supplies remain ample.
