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Wednesday 20 September 2017

Milk powder prices plunge at Global Dairy Trade

Margaret Donnelly

Margaret Donnelly

Milk powder prices fell dramatically at the latest Global Dairy Trade, with skim milk powder and whole milk powder recording the two largest drops.

Overall, the Global Dairy Trade auction concluded with the GDT Price Index down 6.3pc, a result that had been predicted in advance by commentators. 

However, skim milk powder was down 15.5pc, while whole milk powder prices were down 12.4pc. It comes on the back of the last auction of February 21 seeing a 3.2pc drop in overall prices.

Today’s fall comes on the back of weak dairy futures trading and negative sentiment has been attributed to an announcement by Kiwi dairy giant Fonterra that it would be increasing the volumes on product it trades on the GDT.

However, in light of a 2016 Global Dairy Trade annual report published recently, IFA National Dairy Chairman Sean O’Leary said the GDT only traded 636,000t of product during 2016 - down 36pc on the peak levels of trade of 2014, and consisting mostly of WMP and SMP (73pc, or 464,000t). 

He also said that this is only a fraction of global exchanges in powder: less than 12pc of the total quantities of milk powders traded globally during 2016, and just under half the 950,000 metric tonnes of SMP and WMP combined traded by the EU in that year.

“This must inform our analysis of the GDT auction. While it is an important international price discovery mechanism, and clearly influences buyers and sellers, it accounts for a small and decreasing portion of actual global trade, and is less important to us than EU exports and trade.  It is, therefore, essential that co-ops would at all times put GDT in proper perspective, including this month when deciding on February milk prices,” he said.

O’Leary also said that EU commodity prices, as reported by the EU MMO for December, January and February have been stable to slightly easier, but as at February 26 continue to return around 36.5c/L gross (before processing costs), equivalent to a milk price of 31.5c/L + VAT (33.2c/L including VAT),” he said.

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