Dairy prices disappointed at yesterday's Global Dairy Trade (GDT) auction, with returns down just under 1pc, while Ornua has indicated its February returns implies an indicative return of 45.0 cpl, VAT inclusive (down from 49.1cpl in January).
rnua said the decrease is due to continued weaker returns across the product mix.
At the GDT auction, whole milk powder prices were largely flat and described as ‘wrong footing’ futures market expectations of a circa 2% lift.
Prices for most other products eased (including a whopper 10% dip in cheese prices), taking the overall GDT index circa 0.7% lower.
According to Nat Keall, Economist with New Zealand bank ASB whole milk powder prices have been remarkably stable over the calendar year thus far.
"Freed from its COVID restrictions, China has made a modest return to global dairy markets, with its proportion of purchases over the last two auctions hovering around 60% - its highest since February 2022.
"But that's set against softer demand from other regions, with Southeast Asia purchasing its lowest volumes since mid-2021," he said.
With the New Zealand milk production season nearly at an end, and not much product left to sell, Keall said the underperformance in prices over the last couple of dairy auctions "nudges prices slightly lower at the margin".
"We remain comparatively conservative on the outlook for dairy prices over the next twelve months.
"Economists aren't as pessimistic about the outlook for the global economy as they were at the beginning of the year, but global growth is still projected to slow over the course of the year, with the recovery in China set to be offset by a deceleration elsewhere.
"And even in China, consumer spending remains sluggish, and Beijing's 5% growth target for the year is fairly conservative.
"In aggregate, that should mean softer global dairy consumption. On the supply-side, global dairy supply continues to mount a modest comeback," he said.
Kneall also pointed out that ahead of Cyclone Gabrielle, NZ milk production had decent momentum, with a 1.2% yoy lift in January. "Gabrielle has added a bit of uncertainty into the mix, but the most-impacted regions don't have a huge dairying presence (Hawke's Bay and the East Coast are about1% of total NZ production) and the combination of wet + warm weather has been positive for grass growth more recently," he said.
Over in Europe, he said milk production continues its tentative improvements, albeit off a low base.
"Supply isn't surging but looks set to outpace demand for a while yet," he said.