Seventh Consecutive Drop in Global Dairy Trade Prices Raises Concerns
Karl Dean, chair of the Federated Farmers dairy section, emphasized the importance of focusing on controllable aspects of farming in response to these declines. He noted that dairy prices, like other commodities, typically follow cyclical patterns, and recent trends should not come as a surprise.
Several factors are contributing to the drop in global dairy prices. Cristina Alvarado, head of dairy insights at NZX, pointed to robust milk production in major regions such as the US, EU, Argentina, and New Zealand, which continues to result in a sufficient supply of milk powders. Buyers are reportedly engaging in hand-to-mouth purchasing rather than stock-building, keeping price pressures contained.
Fonterra has maintained its forecast for a farmgate milk price range of $9 to $11 per kilogram of milk solids, with a midpoint of $10. However, ongoing decreases in GDT prices are expected to exert downward pressure on this forecast. Dean anticipates an adjustment in Fonterra's forecast range in response to these market conditions.
Dean also highlighted the influence of the dairy cycle, where higher prices typically lead to increased production. He mentioned that New Zealand's pasture-based systems offer some insulation from international price fluctuations compared to regions that rely heavily on feed inputs.
