Archive: GDT auction prices up 9%, will UK prices react?

Published 5 February 15

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After four positive Global Dairy Trade (GDT) auctions in a row, including the most recent 9% overall increase seen on Tuesday, it could be perceived as world commodity prices turning the corner. Although this increase only goes a very small way to recover the ground GDT prices have lost since the start of 2014 (see graph below) it is the first positive sign from the world markets.

 GDT 05.02.15 - 1

We know that over time the EU and hence UK wholesale prices tend to follow the GDT auction prices (see Skim Milk Powder (SMP) graph below) so should we be expecting UK farmgate prices to start to turn soon? 

 GDT 05.02.15 - 2

Although the result is positive, and the best news there has been for some time on global dairy markets, it is unlikely to have much short term effect on farmgate prices. EU and UK milk production is heading towards the seasonal peak and there is less concern over drought affecting NZ milk production. This makes it uncertain as to whether this increase in auctions will continue, meaning it is too early to tell whether this signifies the start of a prolonged upturn which would lead to less pressure on UK prices, or merely the stabilisation of markets.