Commenting on this week’s 3.6% increase in the weighted average price for commodities traded through the Global Dairy Trade (GDT) platform run by Fonterra, with all products benefiting, IFA National Dairy Committee Chairman Sean O’Leary said the trend of strong butterfat price recovery was now firmly established after four successive auctions.
He added that while it may be a little early to draw similar conclusions on powder prices, there was clear indications from the December and this week’s price increases that many buyers now realise they will no longer be able to buy powders cheaply.
Referencing EU Commissioner for Agriculture Phil Hogan’s speech at the IFA 60th Anniversary celebration this week, Mr O’Leary said this was evidence that it was wise to avoid talking oneself into a worse dairy price crisis than actual events might justify.
“Butterfat prices have increased by over US$1,000/tonne, by 36.5% for AMF and 42% for butter, over the last four auctions, further narrowing the competitiveness gap between global and European butterfat prices. This is unquestionable evidence of strong renewed market activity with buyers firmly back,” Mr O’Leary said.
“Powder price increases are more tentative, having only started to increase in the last December auction, but should yesterday’s positive price direction of +2.8% for SMP and +1.6% for WMP be continued over the next couple of auctions, I think there will be little doubt left but that we are finally witnessing a real turning around of global dairy prices,” he said.
“It is crucial that our industry would hold its nerve at this point. Little milk will be produced over the coming weeks, as seasonality and superlevy intervene. Co-op boards must hold milk prices and through keenly priced inputs and case by case examination of credit cases in particular, minimise pressures on suppliers’ cash flow on the eve of quota abolition,” he concluded.