Global Dairy Prices Hit a Six-Year Low in Auction

WELLINGTON, New Zealand—International dairy prices fell to a six-year low in the overnight GlobalDairyTrade auction for July 1, an international trading platform established by New Zealand's Fonterra Co-Operative Group.

The GDT Price Index, which covers a variety of products and contract periods in the auction, fell 5.9% from the previous auction on June 16. The average selling price was US$2,276 a metric ton.

The average selling price for whole-milk powder was $2,054 a metric ton, down 10.8% from the prior auction.

The GlobalDairyTrade auction is closely watched, as the GDT Price Index is widely considered a market reference price for dairy products.

"The NZX Futures market anticipated whole milk powder prices would fall overnight. However, the market underestimated the size of the fall," said New Zealand's AgriHQ dairy analyst Susan Kilsby. "The last time milk powder prices were this low was six years ago. At that time demand was limited due to the global financial crisis."

Looking ahead, she said it would be difficult for dairy commodity prices to increase significantly in the coming months as the quantity of milk powder available on GDT will rise with New Zealand's seasonal increase in production.

The dairy industry is the backbone of New Zealand's economy, accounting for more than a quarter of exports. But the country's farmers have watched global dairy prices more than halve since early 2014 and many are operating below break-even.

Dairy prices have suffered because of world-wide overproduction, subdued demand from important markets such as China, and a glut sparked by Russia's ban on U.S. and European food imports. Fonterra Co-Operative Group, the world's largest milk exporter, is reviewing its business and has slashed the forecast payout for its 10,600 farmer shareholders.

Products on offer at the GlobalDairyTrade auction include whole-milk powder, skim-milk powder, butter, cheese and anhydrous milk fat.

Write to Rebecca Howard at [e-mail]

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