By Cristina Alvarado, commercial manager, data and insight, at NZX.
The global dairy market experienced various changes in May 2024, from production across key regions and New Zealand showing shifting trend results in exports.
In the auctions that have taken place so far in this period, the Global Dairy Trade (GDT) index increased in both May events and also in June’s first event. GDT saw a 1.8% increase in the index at May’s 255 event, followed by a 3.3% rise in event 356, and a 1.7% surge in June’s 357 event.
Prices for whole milk powder (WMP), skim milk powder (SMP), butter, and anhydrous milk fat (AMF) rose across all three events, mainly driven by lower volumes offered and sustained demand from the Middle East and southeast Asia, and occasional buying from north Asia.
Milk production in New Zealand had a decline in April with 1.46 million tonnes of total milk collected, down -4.1% year-on-year (YoY). On a milk solids basis, the drop was -2.6%. Despite this, the season-to-date production is down only -0.5%, with a 0.8% increase in milksolids.
Our NZX milk production predictor has estimated a -5.7% YoY drop for May. The NZX farmgate milk price forecast for the 2024-25 season was revised on June 6 up to $9.09/kgMS, reflecting the latest GDT results, while the forecast for the 2023-24 season closed at $7.80/kgMS.
In other regions, milk production growth remains sluggish, not at the levels of growth expected at the beginning of the year. The United States keeps reporting YoY decreases (-0.4% in April), Argentina and Uruguay are facing significant production drops (-16.2% and -6.6% YoY, respectively), and Europe has reported a modest 0.8% increase in March production. Australia saw a 2.5% YoY increase in April, continuing its recovery with a 3.0% season-to-date improvement.
New Zealand’s dairy exports’ growing trend of the last months has changed in April with total volumes decreasing by -10.1% YoY. WMP exports dropped by -16%, mainly due to reduced demand from China and North Africa. However, year-to-date (YTD) exports remain up by 6.6%. Skim milk powder exports also declined by -35% YoY.
In contrast, whey, and whey protein concentrate (WPC) exports rose significantly, up 37% and 63% YoY, respectively.
China’s dairy imports fell by -12.5% YoY in April, with significant drops in SMP (-39%) and infant formula (-36%), but notable increases in AMF (88%) and butter (31%). The US saw a -6.7% decline in export volumes in March, while Argentina’s exports rose by 11.3% YoY in April. Australia’s exports surged by 19.9% YoY in March, driven by substantial increases in butter and cheese. Total dairy export volumes out of Europe decreased -12.8% YoY in March, down -3.7% YTD.
Fonterra announced its opening farmgate milk price forecast for the 2024/25 season, with a range of $7.25 to $8.75 per kgMS and a midpoint of $8.00/kgMS. The co-op also narrowed its range for the 2023/24 season to $7.70-$7.90/kgMS. These cautious forecasts reflect ongoing market volatility and uncertainty, particularly regarding Chinese demand.
Additionally, Fonterra’s recent Q3 results showed a slight increase in profit from continuing operations, attributed to strong performance across its product channels.
The 2023/24 season has ended, and the New Zealand dairy sector continues to face a mixed outlook. While production and export figures present challenges, improved commodity prices and strategic adjustments by key players like Fonterra offer cautious optimism for the coming months.
