Has the World Dairy Market Turned a Corner?

GLOBAL – World dairy prices could be turning amid a complex of Oceania drought and EU superlevy fears, analysts are suggesting after five consecutive gains on the global price index.

19 February 2015

2 minute read

Lower volumes helped Tuesday’s Global Dairy Trade (GDT) to its second major price increase in a row, says UK levy board DairyCo.

Dry southern hemisphere conditions and a slight scaling back of EU output from quota restrictions were attributed for less product at the sale.

The overall index lifted ten per cent, while Dutch processor Friesland Campina (FC) has announced higher prices for its farmers.

However, DairyCo is looking to the next trade, scheduled for 3 March, to decide whether the change in fortunes in temporary or longer term.

This will “help shed light on” the market direction, said DairyCo, reacting to the biggest single increase in the GDT for nearly two years.

Cheddar was up nearly 17 per cent, Whole Milk Powder 13.7 per cent, Skim Milk Powder 5.7 per cent and Butter up 1.1 per cent.

Higher values for these products has been given by FC as reasons for its own price rise - equivalent to 0.9 pence per litre - of €1.25 per 100 kilos.

“In addition, export prospects have been improved by the weak Euro,” said DairyCo. “Provided price increases continue, we would expect there to be a knock-on effect on UK markets.”

The UK market, while less directly impacted by world prices, does see its wholesale markets trend with the EU, DairyCo added.

“Dairy farmers in the Netherlands have seen milk prices fall by around one third over the past year, the largest drop of the main milk producing countries in Europe, resulting from its high level of exposure to global markets.

“The recent improvements in commodity markets, as witnessed from recent GDT results, now seem to be feeding through to Dutch farmgate prices.”