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Dairy Auction Update – Feb 6th, 2023

It’s an interesting time to be in dairy! With the impact of climate change on weather patterns and regulations directly impacting dairy and feed production, and supply chain disruptions due to tension in the Middle East, we are facing a perfect storm of supply constraint and demand increase. While tension in the Middle East has seen increases in oil and freight prices, the fear of running out of food appears to be outweighing the increase in costs, most apparent in the Global Dairy Trade (GDT) overnight.

From a supply perspective, weather, milk price, and environmental regulations have seen a consecutive decline in milk production out of the EU, with declines nearing 20% YoY out of Ireland. The US is no different, with cattle prices outweighing the milk price and driving milk production down. AUS may be reporting YoY increases however, when looking back at the woeful figures last year, a decline out of Australia would paint a far more colourful picture than the meagre production figures the nation has been pushing.

And NZ. Honestly, El Nino has up until this point had very little impact on our production, with very tropical weather through much of the Summer, pushing out thick, green, grass. That, however, has taken a turn over recent weeks with dry, hot conditions sparking fires in the South Island while irrigation is having to pump through much of the South Island. Will we have another positive production figure for January? I think it’s possible, with plenty of feed around however, heading through February, cow heat discomfort and dry conditions in the South may have an impact on that at a national figure.

So, what am I getting at? Global milk production is down approximately 1.5-2% YoY at this point in the season. While last night’s GDT saw single digit volumes reductions compared to the previous event, the upcoming GDT auctions are seeing reductions close to 30% lower YoY. Couple this with the threat of war escalations, and you can see where the demand really is coming from. And what corroborates this? The Middle East taking out top buyers’ spot at GDT 349.

So, here’s the list of what happened;

  • WMP up 4.2%, driven by the Middle East
  • SMP up 4.6% driven by North Asia – with a premium now set for NZ C2 Medium Heat SMP over EU equivalent of US$125/t
  • Butter up a massive 10.3%, up 28.4% from the previous year – driven from North Asia and IMEA
  • AMF up 3.3% – driven by North Asia
  • Cheddar up 6.3% – driven by South East Asia
  • Mozzarella down 1.8%
  • BMP up 1.2%