Dairy Analyst Stu Davidson joins Dom George to provide a lowdown on the Global Dairy Trade (GDT) index's latest dip and what's got the skim milk powder prices taking a tumble.
Davison reckons a bit of a market correction was on the cards, with folks having a chinwag about it before the auction and futures market prices hinting at a slide.
Overall, the index fell by 2.3%, with skim milk powder (SMP) prices dropping a surprising 5.2%.
"The market was pricing a bit of a correction leading up to this auction," Davison says, pointing out that New Zealand skim even lost its premium over European skim, a real curveball.
Whole Milk Powder (WMP) was down 2.8%, while Butter and Mozzarella (MOZZ) were also down 1% and 0.4% respectively.
On the other side of the coin Lactose (LAC) saw the biggest positive change up 4.8%, followed by Cheddar (Ched) up 4%, Butter Milk Powder (BMP) u 3.7% and finally Anhydrous Milk Fat (AMF) up just 1.4%.
The conversation wasn't all about numbers. Stu and George delve into how China's appetite and the Middle East's post-Ramadan quiet spell shaped the market. With Ramadan done and dusted, the Middle East buyers weren't as keen, leading to a price drop reflecting what China's willing to fork out.
"This new price reflects what China is willing to pay," giving us a clearer picture of the global demand. Seasonal shifts are also churning the butter of market stability.
The Southern Hemisphere is winding down production, while the Northern Hemisphere is just getting started. Davison observes that despite the expected tightening of milk supply in New Zealand, there's a surprising amount of skim in the market. Even though production is on the decline globally, with all top five exporters reporting drops, demand remains a mixed bag of firm yet uncertain.
"So the most recent data...is decline," Stu notes, highlighting a global trend that's keeping prices steady for now.
All up, Davison's take is that the dairy market is "stable, but with the clarity on an IFH."
It's like the calm before the storm, with all eyes peeled on how supply and demand will dance in the coming months.
"So we're back to that point where we see the market responding to what's expected, a positive thing."
Listen to the full chat between Stu Davison and Dominic George above.
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