Global Dairy Trade auction remains unsettled

Fonterra milk tanker leaving farm. Photo / Damian Alexander/Likeminds Agency / Supplied by Fonterra

After a positive lift earlier this month, prices have dropped in the latest Global Dairy Trade (GDT) auction, held overnight, with a 1.5 per cent decline across the board.

The unexpected downward shift followed the release of January milk production figures by Dairy Companies Association of New Zealand (DCANZ) yesterday evening, which showed a 1.9 per cent increase in milksolids, year on year, for the month.

That, combined with knowledge recent rainfall from Cyclones Hale and Gabrielle has set up pastures well, particularly in Waikato, for increased milk production towards the end of the dairy season, has given buyers confidence more product will be available than anticipated.

Add in ongoing and significant market volatility, and all of these factors did not make for a positive GDT.

Whole milk powder, which peaked in March at US$4757/MT, drove the overall index down with a 2.0 per cent drop, to an average of US$3264/MT.

Skim milk powder - Fonterra’s second-biggest reference product - dropped 2.4 per cent to an average of US$2769/MT, while anhydrous milk fat fell 2.6 per cent to an average of US$5447/MT.

Butter bucked the trend with a 3.8 per cent leap, to an average of US$4922/MT.

Similarly, cheddar rose 1.5 per cent to an average of US$5086/MT.

Figures for lactose and butter milk powder were unavailable and sweet whey powder was not offered at this event.

30,693 MT of product was purchased by 117 successful bidders, compared to 32,582 MT and 116 winning bidders last time.

In December, Fonterra narrowed and lowered its forecast for 2022/23 - with a farmgate milk price range of $8.50–$9.50 per kgMS and midpoint of $9.00.

In the same update, its forecast 2022/23 normalised earnings guidance was lifted to a range of 50 to 70 cents per share.