Global Dairy Trade (GDT) index starts new year with price fall

The Global Dairy Trade (GDT) index has started the new year with a fall, this time by 2.8% to US$3,365, in a return to the dominant trend of the past seven months.

This decline was seen across all products, including whole milk powder (WMP) down 1.4% and skim milk powder (SMP) down 4.3%.

Although there have been some periods of uplift, prices have been in overall decline since their peak in March 2022, tracking the steady increase in global milk supplies.

Analysing the latest event, Katherine Jack, AHDB Dairy analyst, said the latest GDT auction was now back to levels last seen at the end of 2020.

"Powders make up most sales on the platform, with WMP making up about half of volumes sold and SMP just under a quarter," she explained.

"Powder markets are particularly influenced by Chinese buying activity, which has been subdued in 2022, putting downwards pressure on prices."

Ms Jack added that currently, the outlook for import demand from China remained uncertain.

"On the one hand, the easing of Covid restrictions may boost economic activity, and in turn demand for dairy.

"On the other hand, the subsequent outbreaks of Covid following the removal of most restrictions will continue to pressure China’s economy."

In addition, the global picture for markets is still on the negative side, according to new analysis by Rabobank.

Expectations are for demand to continue to weaken as a response to costs, Rabobank says, while supply is likely to grow as the impact of higher milk prices comes to fruition.

For powders in particular, the reduced global demand combined with the high cost of drying will continue to put an extra squeeze on producers.