International dairy markets turn negative on the year
After showing surprising strength and resilience during Q1 2022, global dairy prices met resistance and have lost all YTD gains, turning net negative last week’s Global Dairy Trade (GDT) auction. Overall results from Jul. 5 showed aggregate dairy product prices sank a dismal 4.1 percent, their second-largest drop since the start of the year.
Most product categories saw price losses save for cheddar cheese, the single nominal gainer. Core products suffered the most, with anhydrous milkfat (AMF) down 3.1 percent, skim milk powder down 5.1 percent, whole milk powder down 3.3 percent, and butter dropping the most, giving up 9.1 percent. The butter drop was overdue and finally brings its price more reasonably below that of pure butter oil or AMF.
The latest auction saw 147 active bidders and 23,461 MT of product traded. At this time of year, bidding is typically less active and lower volumes are offered, making the price drop still more surprising.
Also interestingly, the cumulative results of the auctions this year now show a net negative overall result. Prices rallied sharply through most of Q1 on optimism that the worst of COVID-19 was behind us, but as prices rapidly rose, central banks began raising interest rates on fears of inflation. Likewise, new cases of COVID-19 and developments such as the BA5 sub-variant have proven harder to control, skirting both vaccines and natural immunities. Spikes across China prompted sudden quarantines and lockdowns followed in the pursuit of a strict zero-COVID policy. The closures have threatened the country’s economic growth as businesses shut down and mass testing was imposed.
Coupled with growing fears of recession and the potential for lower demand growth, buyers balked at high prices and retreated from the market. As a result, all the Q1 price gains were given back in Q2, and the cumulative price movement is down now 3.4 percent.
Cumulative GDT Auction price changes
Source: Global Dairy Trade
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