Global dairy prices have fallen again, with the latest GDT auction marking the 7th straight drop. The average price has slid to a 15-month low of US$3678/tonne.
According to ASB Senior Economist Chris Tennent-Brown, this was expected. The main reason: too much milk in the global market.
Why is there an oversupply?
Last year, farmers earned record-high payouts (over $10 per kg of milk solids). Naturally, everyone tried to produce as much milk as possible to cash in. When all farmers do this at the same time, the result is a big production surge, which pushes prices down — a classic boom-and-bust cycle in dairy economics.
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What about this season’s price?
- ASB forecast: $9.75
- Fonterra earlier forecast: $10
Tennent-Brown says that even $9.50 would be considered very good in a normal year, but expectations are distorted because last year’s payout was exceptionally high.
What will happen next?
Future milk prices now depend heavily on weather:
- Last year, a summer drought limited production and helped support high prices.
- This year, if weather stays good and production remains high, prices are unlikely to rise soon.
Bottom line
The global dairy market is under pressure because of too much milk and steady production growth. Farmers, companies, and analysts need realistic planning, keeping in mind that dairy markets are highly sensitive to both global output and climate conditions.
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Disclaimer
I do my best to share reliable and well-researched market insights but occasional errors or omissions may slip through. Please view all content as informational, not financial advice.
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