The latest Global Dairy Trade auction concluded with a GDT Price Index increase of 2.7% from the previous auction, news long overdue for the dairy industry.
Dairy Analyst Stu Davison told REX host Dominic George that while it is a positive number for the first time in a while, the global dairy market is not immune to the repercussions of China's financial troubles.
"The downside here, however, is it wasn't China pushing these prices, it was Southeast Asia and the Middle East doing all the heavy lifting," explained Davison, highlighting the intricate interplay between geopolitics and dairy economics.
"(It's) a good thing to support things in the meantime but a bad thing looking forward with the expectation that China is going to return, so we haven't seen that just yet."
Other key results from the auction include Anhydrous Milk Fat (AMF) up 2.7%, Butter up 1.1%, Butter Milk Powder (BMP) down 6.5%, Cheddar (Ched) down 0.6%, Skim Milk Powder (SMP) down 1.6% and Whole Milk Powder (WMP) was up 5.3%.
One positive result, although it does show some level of improvement for the interim, Davison warned it certainly does not suggest any long-term resolution.
"Let's be clear, looking forward things aren't better.
"This result doesn't move the market completely and we are still, sort of, leaning bare-ish."
He did, however, speak positively about both AMF and Butter which saw positive results and while the milk fat value margins closed down a little bit, reducing the premium of butter slightly, it still holds a massive premium over its AMF counterpart.
Although cheddar was down 0.6%, Davison said GDP cheddar is still the cheapest on the world stage just under EU cheddar prices and significantly below US cheddar prices but still holding ground.
Following a drastic and unexpected 10.9% drop in Whole Milk Powder at last month's auction, the 1.6% drop in value for Skim Milk Powder proved that some analytical trends are still tending to be accurate.
"We've been expecting a bit of weakness in the skim market in the last few months and we are finally seeing that measured compared to Whole Milk Powder.
"To see things move in the right direction in terms of that gauging back together is good."
Despite this, the direction the market actually wants milk to go remains 'pretty unclear' to analysts which Davison said 'adds to the confusion' of the current market.
Listen to the full chat between Dairy Analyst Stu Davison and Dominic George above.
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