Prices eased at the globalDairyTrade auction for a third successive
session close to a three-year low, led by whole milk powder, despite evidence
of slowing milk production growth in the US and some parts of Europe.
GlobalDairyTrade's benchmark index fell 0.9% to its second-worst
reading since September 2009, led by a 5.8% slump to an average of $2,584 a tonne
in prices of whole milk powder, which accounts for most of the volume sold at the
Indeed, whole milk powder prices fell close to those seen in
May, when values reached their lowest since August 2009.
Prices of cheddar cheese and rennet casein also fell, offsetting
firmer results for butter milk powder, skim milk powder and milk fat.
The decline leaves prices 39% below levels at their last
peak, in March last year, since when they have been undermined both by disappointing
demand, softened by macroeconomic weakness, and by soaring production, raised
by unusually benign pasture conditions in major exporting countries such as New
However, milk production expectations have taken a hit from
rising grain prices, which raise feed bills, especially in the US, where
drought has damaged grasslands.
Just 18% of US pasture condition was rated in "good" or "excellent"
condition as of Sunday, down three points week on week, and compared with 46% a
In California, the top dairy state, 5% was rated "good",
with none excellent, and 75% in "poor" or "very poor" health.
Separately on Tuesday US Department of Agriculture analyst
Rachel Johnson, explaining downgrades last week to forecasts for domestic milk production,
cautioned that "the prospect of rising feed prices will likely accelerate" a
trend of raised cow slaughter seen since May.
"Recent high temperatures will likely restrain milk
production over the course of the summer," she added.
However, she warned that "relatively weak forecast income
growth is expected to soften demand, tempering the price effect of reduced milk
'Higher pasture growth potential'
Other countries see milk production growth slide include the
UK, where daily deliveries in the two weeks to July 7 were, at 37.4m litres,
down 1.0m litres on the same week last year, and 400,000 litres below the
The decline has been blamed in part on falling farmgate prices
which have left UK dairy farmers facing an average annual loss of £40,000, on
National Farmers Union estimates.
However, prospects for a slowdown in New Zealand output have
been set back by an improvement in pasture conditions back to last season's
"Temperatures have generally risen in the past week and are
resulting in higher pasture growth potential," Agrifax said, adding that its
pasture growth index was "forecast to continue to steadily increase over the
Furthermore weighing on prices has been inventory data has
showing generous supplies of some products, with European Union butter volumes
key under the private storage aid programme 35% higher than a year ago.