Optimism in global dairy markets is building as the latest Fonterra (GDT) auction realised an average increase of 9.4% and saw Skim Milk Powder (SMP) prices increase by 19.2% to $2,874/tonne, which is its largest increase since March 2013.
Commenting on this latest auction result, UFU Dairy Chairman Jonathan Moore said: “This result has restored the GDT All-Product index to a level (up to $3,042/tonne) which has not been seen since before the Russian import ban on dairy products. This result means that global SMP is now trading at 24% higher than its EU equivalent meaning that this gap should bring about further recovery in European prices. This rise has been partly brought about by the reduced product volumes offered by Fonterra and could also be explained by possible forward buying from Indian buyers. However, this does not detract from the evidence that prices have not only bottomed out but also that there are clear signs of a much awaited recovery in demand.
“Commodity prices have stabilised since the New Year, on the back of these latest results and this should encourage processors to pass these better returns back to their suppliers as quickly as possible. We are hopeful that the dairy industry is turning a corner in terms of seeing a halt to falling commodity dairy prices. The signs are that markets are beginning to tighten and this should be reflected in improving returns for local dairy farmers.”
