October 7, 2022
Global dairy prices decline due to poor demand from China
Global dairy prices continued to decline in the global dairy auction, as prices dropped 3.5% to US$3911 a tonne due to weak demand from Chinese buyers, RNZ reported.
Prices rose 2% in the previous auction, but have generally been declining since reaching a record high in March this year.
Alex Winning, a dairy analyst for NZX, said price declines were caused by a major lack in demand, with Demand to supply ratios almost half of what arrived at the previous auction.
Winning said everyone on the sell side is still waiting with bated breath for the Chinese buyers to drive the market higher. The lack of Chinese demand remains the big unknown for the larger dairy market.
The strong Chinese demand is likely relieving for everyone else on the buy side of the market, as prices for everything else are rising, and the significant impact exchange rate fluctuations are having on consumers' purchasing power.
Wholemilk powder prices, which have a big impact on how much local farmers get paid, dropped 4% to US$3573 per tonne.
Other product prices also dropped significantly, with butter falling by 7%, milk powder by 4.4%, and cheddar by 3.8%.
Winning suggested that it was possible the weakening in prices was a reflection of the larger macroeconomic environment.
He said consumers are having a difficult time, and the steady consumer demand that has been a tailwind is probably starting to fade, adding that the biggest question of all is where to go from here now that the market has roughly been reset to the price point found at the end of August 2022 by this auction.
Despite reducing its forecast payout for the current season, dairy firm Fonterra, a significant supplier to the auctions, also reported a 5% decline in local milk collection in August.