Global dairy prices fall to five-year low on soft Chinese demand

GDT Price Index drops 7.4%
calendar icon 16 August 2023
clock icon 2 minute read

International dairy prices are now on average at their lowest level in nearly five years, according to a major dairy auction on Tuesday, as Chinese demand remains soft and volumes being auctioned have increased, reported Reuters.

The GDT Price Index fell 7.4%, with an average selling price of $2,875 per metric ton at this month's second Global Dairy Trade (GDT) auction. It is now at its lowest level since November 2018.

Whole milk prices also fell 10.9% to an average selling price of $2,548 a metric ton - their lowest level since 2016.

"Dairy market conditions have deteriorated, and prices have fallen sharply," said Bank of New Zealand senior economist Doug Steel.

"Ongoing economic challenges in China and generally softer Chinese yuan were not helping purchasing power. Moreover, there is more Chinese domestic milk supply, onshore milk powder production, and higher inventory levels, so there is no need for the Chinese to chase imported product," he added.

The increase in product was not helping, with dairy product volumes up 3% on the prior auction to a total of 33,580 tons, the auction platform said.

Falling dairy prices are a concern for the New Zealand economy as the dairy sector generates more than 7% of the nation's gross domestic product and the country is already in a technical recession.

ASB Bank economist Nathaniel Keall said in a note that while milk supply is forecast to tighten in the latter half of the farming year, ASB does not expect it will be enough to buoy the market until after much of this year's product has been priced.

GDT Events is owned by New Zealand's Fonterra Co-operative Group Ltd, but operates independently from the dairy giant.

US-listed CRA International Inc is the trading manager for the Global Dairy Trade auction, which is held twice a month, with the next scheduled for Sept. 5.

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