GDT stutters after four consecutive rises

Published 21 October 15

The Global Dairy Trade (GDT) price index fell 3.1% yesterday (20 October), after four consecutive strong rises had seen it increase by 56% over nine weeks. This week’s drop should not have come as a major surprise, given continued strong milk production in the EU and US in particular.

Milk production in NZ has now started to drop below last year, with Fonterra reporting September down 8.7%, compared with September last year. However, the fall in production in NZ (down 240m litres in September) is being more than offset by continued strong rises in the EU (EU-28 up 370m litres in August). High import tariffs for the US mean butter and cheese prices there have remained significantly above world market prices, in turn protecting US farmgate prices. Without true market signals, production in the US continues to exceed last year.

Until major milk production regions (especially key exporting regions) react to price signals and reduce milk supply, the pressure on prices will remain. As a result, any recovery in prices is likely to be slow and subject to regular downward blips. 

GDT Oct15