Dairy Market Analyst Stu Davison provides insights into the current state of the dairy industry, where auction prices for milk powder have experienced a significant drop.
Global Dairy Trade Event 352 concluded overnight with the GDT Price Index down 2.8%.
This downturn is particularly marked in China, which has seen its market share in milk powder plummet to a 10-year low, leading to an increase in activity from Southeast Asia and Oceania buyers.
Davison describes the situation as "purely again a China result," highlighting that China's demand for milk powder is notably weak due to domestic overproduction and lower prices, prompting a culling of dairy cows to rebalance the market.
Skim Milk Powder (SMP) had the biggest move, down 4.8% followed by Lactose (LAC) down 4.4% and Whole Milk Powder (WMP) down 4.2%.
Anhydrous Milk Fat was the only product that saw a positive market move, up 2.5% while Cheddar (Ched) decreased by 1.9%, Butter was down 1.4% and Mozzarella (MOZZ) was down 1.0%.
Key talking points include a detailed analysis of the dairy market's fluctuations and predictions regarding Fonterra's interim results and their potential impact on milk price forecasts. Davison anticipates a tightening of the range, with the possibility of the top-end prediction being reduced.
"I don't think eight dollars or above is at all possible anymore," he remarks, suggesting that the market is unlikely to surpass this threshold unless Fonterra has made significant strides in cost management.
Overall, the conversation paints a picture of an ever-changing landscape in both dairy economics and Formula One racing, where strategic thinking and adaptability are key to navigating their respective challenges.
Listen to the full chat between Stu Davison and Dominic George above.
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