Business

Dairy prices drop in global auction after seven-year high

11:22 am on 17 March 2021

Dairy prices have fallen in the global dairy trade auction (GDT) overnight, following a seven-year high two weeks ago.

The price of wholemilk powder and butter dropped. Photo: 123RF

The average price at the auction eased 3.8 percent to $US4089 per metric tonne - the first fall in four months compared to a 15 percent rise at the last auction.

The price of wholemilk powder, which strongly influences the payouts for local farmers, dropped 6.2 percent to $US4083 a tonne.The prices for other products were mixed, with a fall for butter but a slight lift in skim milk powder. Also, the total amount sold rose more than 5 percent on the previous auction.

Rabobank senior dairy analyst Emma Higgins said prices generally deflated in response to the extra dairy product on offer.

Higgins said this GDT event was expected to be a test for the market, given the price spike in the first week of March. She said the additional volumes were significant, so for average whole milk powder prices to remain above $US4000 a tonne was a good result, as well as the small price gains for skim milk.

Higgins said Rabobank would keep its farmgate forecast of $7.80 per kilogram of milk solids, as strong Chinese demand, global shipping disruptions, and lower worldwide milk production should keep whole milk powder prices high for the coming months.

The strength of prices in recent months saw dairy companies raise their forecast payouts to farmers, to an average of about $7.20 per kilogram of milk solids.