According to the auction results, the price index increased against the background of rising prices for whole milk powder, demand for which intensified in Asian countries due to buyers' concerns regarding a drop in milk yields in Oceania and South America as a result of the El Niño natural phenomenon.
On Tuesday, October 6, the 413th GDT auction took place, following the results of which the price index stood at 1177, which is 14 points (+1.2%) more relative to the previous auction. The average price for dairy products stood at 3928 USD per ton, which is 60 USD more relative to the results of the previous auction. During the auction, 41692 tons of exchange-traded commodities were sold, which is 752 tons less relative to the results of the last auction. The minimum offer was recorded at the level of 38210 tons, and the maximum – at the level of 45165 tons. 165 dairy market operators participated in the auction, which is 10 companies less relative to September 15.
According to the results of the auction, the price for anhydrous milk fat stood at 5683 USD per ton, which is 1.1% less relative to the previous auction. According to DCA Market Intelligence data, at the end of September, prices for anhydrous milk fat produced by Fonterra weakened, as evidenced by the intermediate results of GDT Pulse. Milk fat prices are likely pressed by significant raw milk supply in Oceania. As Edairy reports, seasonal production volume in New Zealand may exceed 1.6 billion kg of milk solids. Cooperatives direct investments into such highly profitable areas as milk protein fractionation and product manufacturing for the foodservice segment. This strategy is designed to protect producers' cash flows from volatility in the exchange-traded commodity market. According to the GDT forecast, in November the price for anhydrous milk fat may decrease by 0.9%, and in December it may increase by 1.1%.
The price for butter at this auction stood at 4740 USD per ton, which is 0.3% less relative to the previous auction. According to USDA data, the situation on the butter market in the US is stable, and milk processing enterprises do not feel a shortage of raw materials. Butter stocks on the American market are significant, and domestic market demand is restrained. Relatively low prices for American butter contribute to demand for the commodity in export markets. According to European Commission data, over the last two weeks butter depreciated in the US to 3008 USD per ton (-1.2%).
As Czapp reports, American butter prices have been declining for the fourth consecutive week against the background of significant milk fat supply. Existing stocks are expected to be sold off by the end of the year due to the activation of purchases ahead of the holidays. According to FAO data, in September export prices for butter decreased in Oceania, but rose in Europe due to limited milk fat supply after a hot and dry summer. As the European Commission reports, last week butter appreciated in the EU to 4784 USD per ton (+0.2%), but depreciated in Oceania to 4875 USD per ton (-4.2%) relative to September 13. Auction organizers forecast a decrease in butter prices by 0.9% in November, but 0.1% more than in December.
The price for whole milk powder stood at 3605 USD per ton and increased by 1.2% compared to the results of the previous auction. According to USDA data, whole milk powder prices strengthened in the US last week against the background of limited supply on the spot market, as milk processing enterprises mostly work to fulfill concluded contracts. As the European Commission reports, last week whole milk powder appreciated in the US to 5137 USD per ton (+1.5%), but depreciated in the EU to 4328 USD per ton (-2.5%) and in Oceania to 3550 USD per ton (-0.4%). According to USDA data, whole milk powder depreciated in the EU in the lower price range, as buyers are not ready to purchase it at current prices. In turn, European milk processing enterprises use raw milk to produce more profitable goods.
According to Fonterra data, this year's El Niño weather phenomenon may put the growth of raw milk production at risk in the short term. El Niño is a periodic rise in surface water temperatures in the eastern Pacific Ocean. This can cause extreme weather events, including droughts and typhoons, and affect pasture conditions and global crop production volumes. Craigs Investment Partners investment consultant Jeremy Sullivan believes that El Niño represents a significant risk, as a substantial reduction in raw milk production by the Fonterra cooperative could affect milk processing volumes and sales of finished dairy products. In turn, lower milk yields in New Zealand could cause global dairy prices to rise. Auction organizers forecast an increase in the price for whole milk powder by 0.1% in November and by 0.9% in December.
The price for skimmed milk powder stood at 3847 USD per ton, which is 4.3% more relative to the results of the previous auction. As FAO reports, in September milk powder prices rose in all major exporting countries under the influence of sustained import demand, especially from Asian countries, as well as due to limited commodity supply for short-term deliveries. In Oceania, active demand from buyers outweighed price pressure caused by a seasonal increase in milk production. As the European Commission reports, last week the price for skimmed milk powder in Oceania stood at 3688 USD per ton, which is 2.4% more than two weeks ago.
According to Czapp data, in the US the supply of skimmed milk powder is shrinking under the influence of intensifying demand from yogurt manufacturers. According to USDA data, skimmed milk powder prices increased in the US last week against the background of downtime at certain milk processing enterprises due to technical reasons, as well as due to intensifying demand in export markets, particularly from Mexico. According to market participants, companies conclude contracts in advance for commodity delivery not only for December, but also for 2027. According to European Commission data, last week the price for skimmed milk powder in the US stood at 4721 USD per ton, which is 11% more relative to September 13. However, prices for the commodity decreased in the EU to 3547 USD per ton (-0.3%), which may be related to restrained behavior by buyers who postpone purchases after price increases in previous periods. According to the GDT forecast, in November and December skimmed milk powder may appreciate by 4%.
Cheddar cheese depreciated to 3925 USD per ton (-3.7%), and Mozzarella cheese depreciated to 3833 USD per ton (-3.9%). According to USDA data, demand for cheeses on the US domestic market is weak (especially from industrial buyers), and their stocks are growing against the background of increasing finished product production volumes. Cheese sales on the domestic market are restrained by rising fuel prices, as long-distance commodity delivery becomes unprofitable. As Czapp reports, the exception was Mozzarella cheese, demand for which rose in the US against the background of the pizza consumption season. One of the reasons for the increase in cheese production volumes in the US is the activation of demand for whey, which is used to produce high-margin whey concentrates. As the European Commission reports, the price for Cheddar in the US dropped to 2964 USD per ton (-8.1%) over the last two weeks.
At the same time, in Europe the situation on the cheese market is mixed. As FAO reports, in September cheese prices decreased in Europe due to significant delivery volumes from the US and intensified competition. According to European Commission data, last week the price for Cheddar cheese in the EU stood at 3694 USD per ton, which is 1.1% less relative to September 13. However, as of the beginning of October, cheese production volumes in Europe contracted. According to USDA data, European cheesemakers felt a shortage of raw milk and turned to producers of other dairy products for additional volumes.
Cheesemakers in France, Greece, and Great Britain are experiencing a shortage of raw milk as a result of severe heat and drought in the summer, which degraded pasture conditions and negatively affected crops and feed harvesting. Demand for certain types of European cheeses is significant. Cheddar prices also rose in Oceania, despite an increase in export supply in September. According to European Commission data, the price for Cheddar cheese in Oceania last week stood at 4000 USD per ton, which is 11.5% more relative to September 13. Auction organizers expect that Cheddar cheese may appreciate by 3.4% in November, but depreciate by 4% in December, and Mozzarella cheese may depreciate by 4.5% in December.
Lactose depreciated to 1677 USD per ton (-6.9%). According to USDA data, demand for lactose remains high, and its supply on the spot market is limited. According to the GDT forecast, lactose may depreciate by 6.9% in December.
Buttermilk powder appreciated to 4123 USD per ton (+0.7%). According to USDA data, buttermilk powder stocks in the US remain low, and some market participants report that all products are already sold out through the end of the year. Demand for the commodity in the export market remains stable. Auction organizers expect that buttermilk powder may depreciate by 2.6% in November, but appreciate by 1.1% in December.
The next GDT auction will take place on October 20.
Press service of the Association of Milk Producers
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