A SPIKE in the online auction Global Dairy Trade has buoyed confidence in the world dairy market, but analysts issued a caution about applying the results to Australia.
Last week the GDT average price rose 12.7 per cent to $US2731 a tonne, a spike driven by a 18.9 per cent kick in whole milk powder prices to $US2695/tonne.
The result also followed confirmation milk production was slowing in the EU.
Rabobank analyst Michael Harvey described this as the “final missing piece of the puzzle” in the global export region milk production contraction.
Mr Harvey welcomed the GDT result but said it had its limitations about what it meant for Australia.
He said Australia’s WMP production was less than 10 per cent of total export product.
A price improvement across a range of categories, such as cheese and butter, would be better applied to the Australian market, he said.
GDT cheddar prices lifted 8.9 per cent to $US3157/tonne with butter picking up 14.1 per cent to $US3274/tonne.
Most dairy farmers in southeast Australia are facing farmgate milk prices at less than the cost of production.
A contraction of milk in global export regions has been welcomed by analysts and will help deliver a sign to buyers the market had hit the bottom, according to Mr Harvey.
He said buyers’ eyes would be on the southern hemisphere “spring flush”, which is tipped to be down on last year. Lower production in Australia and New Zealand could trigger nervousness for buyers who preferred Oceania product.
While supply was tightening, demand for dairy still remained patchy with room for improvement, Mr Harvey said.
Dairy Australia analyst John Droppert was “cautiously optimistic” about last week’s GDT result, referring to dairy stocks still plaguing the global industry.
“It is good for sentiment, a result like that,” Mr Droppert said.
“It could well be the start (of a turnaround) but the market is still very heavily sentiment driven.”
He said stocks of dairy product had not disappeared just because milk production volumes had declined.
Earlier this month the GDT auction lifted 6.6 per cent. At the time, that was the largest increase for six months.
Source: Weekly Times
