Global Dairy Trade prices have suffered their second-largest drop of 2023, pulled down by 10% off butter and 6% off skim milk powder.
The butter slide was unexpected after prices for the product had risen 17% during April, May and June.
The GDT index fell 3.3% in the first July auction and whole milk powder was a stabilising influence, dropping only 0.4%.
After a mini rally in April and May, GDT prices have fallen to their lowest level since late 2020, raising concerns about the ability of dairy companies to deliver $8/kg milksolids at the farmgate.
Westpac economist Paul Clark said the futures market had been anticipating a 4% drop in WMP so the minus 0.4% outcome was better than expected.
But the GDT results did little to set the course for the dairy commodities market.
“For now, still soft global dairy demand and soft global dairy production are weighing on prices.
“That said, an expected rebound in Chinese demand later in the year will hopefully provide some price support.”
For the time being Westpac maintained its 2024 season milk price forecast at $8.90.
ASB economist Nat Keall said he remained conservative on the dairy market outlook in the absence of Chinese demand and the supply picture looking stringer.
His farmgate milk priced prediction is only $7.25 and that is being helped by a slightly weak NZ dollar.
ANZ agri economist Susan Kilsby said weak Chinese demand is showing up in WMP prices and those for anhydrous milk fat, where China is NZ’s biggest market.
The ANX World Commodity Price Index fell 2.3% in June, dragged down by beef, lamb and log prices.