GDT Auction Improves

A small sign of markets improving has been offered to dairy farmers from the latest GDT milk auction.  The weighted index of prices rose by an unexpectedly large 14.8% at the latest sale on the 18^th August.  All milk products apart from lactose and butter milk powder saw values increase.  This is the first upturn in the auction since March, during which time prices have nearly halved.  It is still too early to conclude that markets are turning, however.  Part of the reason that prices rose is that significantly less product was offered at the latest auction – nearly a quarter less than the previous one.  This may not necessarily be due to supply and demand coming back into balance.  It is believed that Fonterra (the major seller on the GDT platform) is holding product back to try and stabilise the market; it did something similar at the turn of the year.  Production in most parts of the world continues to be above historic trends  and demand remains lacklustre.  Therefore far too early to say a corner has been turned on global milk prices.   The next auction is on the 1^st September and it will be interesting to see what direction the market takes then.