Global Dairy Prices Decline Sharply Amid Surplus Supply

The Global Dairy Trade (GDT) price index experienced a significant decline of 4.9% on July 8, marking its largest decrease in two years. This drop was largely attributed to an oversupply in the global market overshadowing demand, impacting major dairy commodities.

Whole milk powder (WMP) and skim milk powder (SMP) saw substantial price decreases of 4.4% and 7%, respectively, contributing to the overall index drop. The broader impact was felt across the dairy sector, with butter prices falling by 5% and anhydrous milk fat (AMF) by 3.9% during the same auction. In contrast, mozzarella prices increased by 3.8%.

Rosalind Crickett, a dairy markets analyst at the New Zealand Stock Exchange, noted that the price decline was anticipated due to strong global supply levels and weaker demand. This situation was exacerbated by the seasonal increase in Fonterra's production volumes.

Since mid-March, the GDT index has dropped by 12%, with six out of eight auctions resulting in negative outcomes. This prolonged downturn could potentially affect farmgate milk price forecasts for the 2027 production season.

Globally, milk production has increased in most major dairy-producing regions, with China being a notable exception. However, upcoming environmental factors, such as heatwaves in Europe and an evolving El Niño in the Pacific, might lead to a reduction in milk production, potentially easing the current supply pressure.