Although the North American flush is over and both milk productivity and the herd are declining across the United States, weak international dairy complex prices are tempering bullish sentiment domestically. Demand from Asia, China in particular, has been weak and as buyers retreat from the market, prices have softened in Fonterra’s bi-weekly online auction platform. Of most relevance to U.S. producers, the decline in global prices and lack of appetite from international buyers will limit export opportunities for co-ops to pursue export volume. 

The Global Dairy Trade (GDT) results of 7.4 percent are the weakest results for a single week witnessed in over a year, creating the seventh consecutive decline. So far in 2023, international prices have retreated approximately 20 percent since the start of the year. These results stand in direct contrast to fundamentals here in America indicating increased rates of culling, declining milk productivity and output expected, and a gradual firming in prices. These are the conditions reported in the July milk production report that caused many products to bounce. Despite some measure of recovery, most dairy products have been unable to sustain a rally given the broader weakness in demand seen overseas. In any gray cloud lies a silver lining, so buyers should be utilizing this pause in price action to engage suppliers in longer-dated contracts to evolve forward positions. 

The full version of this commentary appeared on our IQ platform Aug. 17, 2023. Further information, statistics, and pricing for the dairy market are available to IQ subscribers. Learn more about becoming a subscriber.

Posted by: Information Services
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