Global dairy prices lift as Australian milk production continues to grow

The Global Dairy Trade (GDT) price index was up 1.8 per cent at the May 7 auction, with most commodities posting gains.

The cheddar index led the way, up 8pc.

In further positive signs for the Australian dairy industry, the latest production figures released by Dairy Australia show milk production continuing to grow.

Australia's milk production for March was 2.8pc ahead of the same time last year with year-to-date production up 3.1pc.

NSW led the milk production lift, up 2.4pc for March and 5.7pc for the year to date.

Queensland milk production fell in March but is still up 2.2pc for the season.

Dry seasonal conditions in western Victoria saw production there decline 1.2pc for March, bringing the year-to-date production to about the same as last year.

Northern Victoria showed big growth in March, up 7.9pc.

The latest figures support Dairy Australia's forecast of milk production growth this season.

Pundits are hopeful about the signs for the market for next season.

ASB senior economist Chris Tennent-Brown said the bank remained comfortable with its 2024-25 forecast farmgate milk price for New Zealand farmers of $NZ8.35 a kilogram milk solids.

This is up on its forecast price for this season.

"We continue to think farmers can hope for a farmgate milk price in the top half of Fonterra's guidance range ($NZ7.50-$NZ8.10/kg MS) this year," he said.

Westpac NZ chief economist Kelly Eckhold said the rise in the GDT surprised the market, which had anticipated a fall.

"This week's dairy auction outperformed fears," he said.

"Almost all categories posted decent gains."

Westpac's forecast prices for NZ farmers of $NZ7.90/kg MS for this season and $NZ8.40/kg MS for next season still looked good.

Mr Eckhold said Chinese buyers were again missing from the May 7 auction but Middle Eastern buyers were active as were Europeans buying skim milk powder.

The Food and Agricultural Organisation's Dairy Price Index was down marginally in April .

The index averaged 123.7 points, down 0.3pc from March.

It was the first downturn in six months and the index is still 4.3pc below its value at the same time last year.

"International prices of skim milk powder declined the most, primarily underpinned by sluggish import demand for spot supplies amid high exportable availabilities, especially in Western Europe," the FAO said.

"Meanwhile, world cheese prices fell slightly, mainly reflecting the strengthening of the United States dollar.

"By contrast, world butter prices continued to increase due to steady import demand and somewhat tighter butter inventories in Western Europe.

"In the meantime, whole milk powder prices rebounded moderately due to increased demand for medium-term supplies and seasonally declining milk production in Oceania."