Global Dairy Prices Fall Sharply, Forcing Milk Price Review

Highlights:

• GDT Index Drops 4.1% – Global Dairy Trade auction sees steepest decline this season, with prices falling to US$4,274 per metric tonne at the time of writing.
• Whole Milk Powder Sinks 5.1% – Key product behind farmgate pricing continues to slide as supply outpaces demand.
• Milk Price Forecasts Under Review – Dairy companies may revise payout expectations amid ongoing global oversupply pressures.

Prices Slump at GDT Auction

Global dairy spot prices tumbled at the latest Global Dairy Trade (GDT) auction as supply surged during peak Northern Hemisphere production. At the time of writing, the GDT index dropped 4.1% to US$4,274 (NZ$7,011) per metric tonne, marking the fourth straight decline—and the steepest since the new dairy season began.

Whole Milk Powder Leads Decline

Whole Milk Powder (WMP), which significantly influences farmgate milk prices, recorded the steepest drop. The product’s price weakness highlights the imbalance between rising global output and weakening demand. Such a trend puts pressure on dairy exporters and farmers, particularly in regions reliant on WMP revenue.

Supply Surge Outpaces Demand

This latest auction saw falling prices across most product categories, signaling that global dairy markets remain oversupplied. The ongoing surplus is largely driven by robust Northern Hemisphere harvests, which have outstripped buyers' appetite. As a result, the supply-demand mismatch continues to weigh heavily on dairy commodity prices.

Impacts on Farmer Forecasts and Exporters

Industry experts warn that the extended price slump may force major dairy processors like Fonterra (NZX:  FCG) to reassess farmgate milk-pay forecasts for the upcoming season. Lower commodity prices mean lower returns for farmers, potentially prompting cost-cutting and operational adjustments within the supply chain.

Market Outlook: Watch for Reaction

Observers will closely monitor upcoming GDT auctions to see if markets rebalance. Significant price

Corrections in WMP or a stabilization in broader dairy indexes would help reassure exporters and farmers. Until then, continued downward pressure may lead to further revisions in milk pricing expectations.

Looking Ahead

If the supply overhang persists and demand remains tepid, dairy companies could face a tougher season ahead. Market participants are expected to adjust forecasts and strategies to reflect the evolving global pricing landscape.

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