2 Nov 2022

Global dairy prices hit lowest level since January 2021, further drops likely

11:11 am on 2 November 2022
A generic herd of dairy cows on a South Canterbury farm.

Dairy prices are at their lowest since January 2021. File image. Photo: RNZ Maja Burry

Dairy prices have fallen to their lowest level in nearly two years in the global dairy auction overnight, with expectations they have further to fall.

The average price at the fortnightly sale fell 3.9 per cent to US$3537 (NZD$6054) a tonne, after falling 4.6 per cent in the previous auction.

Prices have generally been falling since hitting a record high in March, and are now at their lowest level since January last year.

"The global dairy market has been bearish for the last six weeks, with more negative drivers stacking up since the last auction," NZX dairy analysts said in a commentary.

They said a drop in demand was the dominant factor even though New Zealand milk production was down 4 per cent on last season.

"We know that consumer demand is light and falling, resulting in buyers and traders not wanting to be stuck with excess stock."

The price of wholemilk powder, a key influence on payouts for local farmers, fell 3.4 per cent to US$3279 a tonne.

The NZX analysts said that Chinese buying of wholemilk powder was notably weaker, but buyers from other countries also looked reluctant to buy.

Prices for other products were generally lower, with skim milk powder posting an unexpectedly large 8.5 per cent price fall, while there were marginal increases in cheddar and butter prices.

"There will likely be some bumps in that path, but there is no heat in the market for it to head up any time soon," the NZX analysts said.

"For buyers this means some breathing space, for the sell side this means concerns around later dated contracts as we start looking into the 2023-24 season already."