Dairy prices  are poised for a third successive decline at GlobalDairyTrade, amid persistent Chinese demand jitters, and as promising signs for northern hemisphere milk output dilute concerns over a New Zealand decline.

SGX NZX futures in whole milk powder, which accounts for most of the product traded at GlobalDairyTrade (GDT) auctions, have extended their decline since the last event two weeks ago.

The best-traded November whole milk powder lot settled at $3,300 per tonne on Monday, and the January lot, the next most liquid, at $3,320 per tonne – both setting contract closing lows.

These futures prices suggest that values of GDT whole milk powder contracts will slide by 3-4% at Tuesday’s auction, a performance which would leave values at their lowest since late 2020.

While butter and skim milk powder futures implies some scope for gains in these two items at GDT, the overall picture suggests a third successive dip in the GDT index, which hit a 20-month low at the last event, two weeks ago.

China concerns

“SGX futures are suggesting mixed results for the GDT event… with butter and skim milk powder up a little, but whole milk powder down,” said Nate Donnay, director dairy market insight at StoneX.

Noting the market’s lack of buoyancy, despite a continued decline in milk production in key exporter New Zealand, he said that “maybe” demand from China, the top dairy importer, “has dropped back off again”.

“That would help to explain the significant weakness we’re seeing in powder prices across all the major exporters, and especially in Oceania whole milk powder,” he added.

China’s dairy imports in September fell by 6.0% year on year to some 278,000 tonnes, shrinking for a seventh consecutive month, “as ongoing Covid restrictions continue to impact demand”, according to Fonterra, which processes the vast majority of New Zealand milk.

The US Department of Agriculture reported that investigations into results of the last GDT auction suggested that “there was good WMP [whole milk powder] demand from North Asia,” a proxy for China, “but not at higher price points”.

‘Resurgence of milk output’

Meanwhile, there are improving reports of milk production in Europe and the US, if in a seasonally weaker time of year.

In the US, milk output in September rose by 1.5% year on year, a third consecutive month of increase, which Fonterra said “reflects the gradual herd size growth and increased milk per cow yield”.

In the European Union, a decline of 0.5% in milk deliveries over the first eight months of 2022 has reversed, as “a break from the summertime heat, timely rains that have freshened pastures, and strong milk pay prices have promoted a resurgence of farm milk output,” the USDA said.

Its sources forecast that production data for project September and October “may be above output levels of 2021 in some countries.

“As seasonal milk output approaches the nadir for the annual milk production cycle, weekly collections in Germany and France… are 1.5 and 1.0%, respectively, above the same week’s collections one year ago,” the USDA said.

“Milk intakes are now higher than expected.”


Sentiment nonetheless remains downbeat on milk output in New Zealand, which is amid its seasonal production peak.

Cumulative output for the June-to-September period, the first four months of 2022-23, is running 4.0% behind the year-ago pace, making the weakest start to a season in five years.

“Significant rainfall in parts of the North Island is impacting peak milk production,” Fonterra said.

“Lower sunshine hours and the continued wet weather has led to lower-than-optimal pasture covers.”

The USDA said that “rainfall is ongoing in some areas where farmers state that they are at a point where more sunshine is essential to dryer pastures and field growth, as supplemental feed supplies that supported the pause in pasture use become nearly exhausted”.