Dairy Prices Plunge to Two-Year Low Amid Market Oversupply

Dairy prices have fallen to their lowest levels in two years, with the average auction price dropping by 4.3 percent to US$3,507 per tonne. This decline follows a 3 percent decrease in the previous auction held two weeks ago. The price of whole milk powder, a significant factor influencing farmers’ payouts, also saw a reduction of 2.4 percent, settling at US$3,364 per tonne. The Global Dairy Trade Price Index has now reached its lowest point since January 2024.

Market Dynamics and Regional Insights

NZX dairy analyst Rosalind Crickett noted that the recent auction experienced weak bidding as a result of market oversupply. She indicated that regional purchasing was largely led by North Asia, which represented 50 percent of total product sales. Crickett emphasized that the drop in milk powder prices, encompassing both whole milk and skim milk, exceeded market expectations.

The analyst pointed out that global milk production continues to rise, with reports of increased milk collections in China. “All in all, this is expected to keep downward pressure on milk powder prices globally, until a supply correction occurs,” Crickett commented. This outlook suggests that the current trends may persist unless adjustments in supply take place.

Impact on Dairy Industry Forecasts

In light of the declining prices, dairy companies have revised their forecast for the midpoint of milk prices. The new projection stands at US$9.50 per kilogram of milk solids. Additionally, butter prices have seen a considerable drop of more than 12 percent, while cheddar prices experienced a rise of over 7 percent.

As the dairy market grapples with these challenges, stakeholders are left to navigate a landscape characterized by fluctuating prices and varying regional demand. The situation will require close monitoring as producers and companies adapt to ongoing shifts in the supply chain.