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Global dairy auction prices near seven-year high

Strong global demand has pushed dairy prices to levels not seen since 2014.

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Global dairy auction prices near seven-year high

Since the middle of November, prices at the Global Dairy Trade (GDT) auction have risen steadily, but in the March 2 auction the average price jumped by 15 per cent to US$4,231 (£3,056) a tonne.

 

Whole milk powder led the way with a 21 per cent increase in value, with butter prices up by nearly 14 per cent.

 

The rise in cheddar and skimmed milk powder prices was more muted and there was a small drop in the value of butter milk powder.

 

The GDT result pushed up dairy futures prices in the US and Germany.

 

A combination of a seasonal decline in New Zealand diary production and very strong demand in China pushed the GDT price up.

 

The strong performance of whole milk powder could be a benefit to British dairy farmers even though very little of the commodity is produced in the UK, according to Patty Clayton of AHDB.

 

She said: "While the UK will not benefit directly from the higher WMP returns, they will encourage more milk to be directed into WMP leaving less available for other products.


"This will, in turn, provide support to the value of both fat and protein, pushing up prices of other dairy products.”


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Short term UK milk prices will be influenced by the size of the spring flush and how much needs to be exported.

 

Almost all the milk and cream exported in the spring is shipped to the EU.

 

Trade this year will be under new post-Brexit rules.

 

There will be no tariffs on exports, but shipments will have to be accompanied by customs declarations and health certificates, which will add to the cost and time taken to ship milk.

 

AHDB expects March GB milk production to be a little less than last year, with April output 0.8 per cent higher at 1.110 billion litres and May production 1.5 per cent up at 1.160 billion litres.

 

This spring is unlikely to see the same disruption to the domestic market caused by Covid-19 as last year, with demand continuing to benefit from more in-home consumption because of lockdown and the gradual return of foodservice demand.

Global production on the rise

Global production is expected to increase by 2.7 billion litres in 2021, according to analysts at Rabobank.

 

That compares with a 4.5bn litre or a 1.4 per cent increase in 2020.

 

The expected 0.9 per cent in production is a little behind the projected growth in global population in 2021, with demand in some countries being influenced by higher milk consumption per person as well as a growing population.

 

In July 2020, think tank the OECD and the UN Food and Agriculture Organisation predicted that global dairy consumption per person will increase by 9 per cent over the next decade, while the population is set to increase by nearly 10 per cent.

 

European consumption per head is predicted to increase by 6 per cent over the next 10 years, although the population could shrink by nearly 1 per cent.

 

This contrasts with India, where consumption per head is predicted to jump by more than fifth, while the population grows by 9 per cent.

 

Analysts said a note of caution does need to be sounded about the GDT results – higher prices invariably lead to increased output, dampening the market in time.

 

Prices rose rapidly in late 2012 and held for 18 months. However, increased global production meant that auction values plunged the following year.

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