Can GlobalDairyTrade auction slow 'autumn free fall' in butter prices?

07.11.2017

The GlobalDairyTrade auction on Tuesday looks like being an especially important one.

Prices of butter, after setting record highs, are melting fast, with values in the European Union down a further 4.3% to E561 per 100 kilogrammes in the week to October 29, European Commission data on Monday showed.

That took to 14% their tumble from a mid-September high.

“After heating up all summer, the European butter market is in an autumn free fall,” the US-based Milk Producers Council said.

‘Minor capitulation’

And as the butter market has passed its sell-by date, some other dairy markets have softened too.

Prices of skim milk powder - for instance, the companion product to butter in processing, and of which the EU has huge inventories - dropped 2.7% week on week in the bloc to E155 a tonne – the lowest on commission data going back to 2001.

In the US too, butter prices “are suffering a slump”, the MPC said, shedding 3% last week on the CME spot market, where cheddar blocks suffered a “minor capitulation” on Friday.

As for the dairy protein market, “since early September, whey futures contracts for the first half of 2018 have lost around 9 cents, or between 19-24% of their value”, the council said, flagging a doubling in US stocks year on year to a record 105m pounds.

‘Soggy, miserable spring’

Where the GlobalDairyTrade auction is key is in showing how significantly such price declines have spread to the broader global market – and how much may have been counteracted by the big bullish feature for dairy markets at the moment in weather setbacks to output in New Zealand, the top milk-exporting country.

“Last week New Zealand reported September milk collections down 1.6% from last year at the lowest total for the month since 2012,” the MPC noted.

“It has been a cold, wet winter and a soggy, miserable spring.”

At Commonwealth Bank of Australia, Tobin Gorey said that the auction, run by New Zaeland-based Fonterra, “will give us some indication on which of weaker global dairy prices, and a soggy start to the New Zealand season, has greater market impact”.

New Zealand-traded whole milk powder futures, a market benchmark, are not offering too much hope for bulls, closing on Monday at $2,925 a tonne, down 6.5% since the last GlobalDairyTrade event, on October 17.


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