The GlobalDairyTrade auction on Tuesday looks like being an especially important one.
Prices of butter, after setting record highs, are melting fast, with values in the European Union down a further 4.3% to E561 per 100 kilogrammes in the week to October 29, European Commission data on Monday showed.
That took to 14% their tumble from a mid-September high.
“After heating up all summer, the European butter market is in an autumn free fall,” the US-based Milk Producers Council said.
And as the butter market has passed its sell-by date, some other dairy markets have softened too.
Prices of skim milk powder - for instance, the companion product to butter in processing, and of which the EU has huge inventories - dropped 2.7% week on week in the bloc to E155 a tonne – the lowest on commission data going back to 2001.
In the US too, butter prices “are suffering a slump”, the MPC said, shedding 3% last week on the CME spot market, where cheddar blocks suffered a “minor capitulation” on Friday.
As for the dairy protein market, “since early September, whey futures contracts for the first half of 2018 have lost around 9 cents, or between 19-24% of their value”, the council said, flagging a doubling in US stocks year on year to a record 105m pounds.
‘Soggy, miserable spring’
Where the GlobalDairyTrade auction is key is in showing how significantly such price declines have spread to the broader global market – and how much may have been counteracted by the big bullish feature for dairy markets at the moment in weather setbacks to output in New Zealand, the top milk-exporting country.
“Last week New Zealand reported September milk collections down 1.6% from last year at the lowest total for the month since 2012,” the MPC noted.
“It has been a cold, wet winter and a soggy, miserable spring.”
At Commonwealth Bank of Australia, Tobin Gorey said that the auction, run by New Zaeland-based Fonterra, “will give us some indication on which of weaker global dairy prices, and a soggy start to the New Zealand season, has greater market impact”.
New Zealand-traded whole milk powder futures, a market benchmark, are not offering too much hope for bulls, closing on Monday at $2,925 a tonne, down 6.5% since the last GlobalDairyTrade event, on October 17.