The decline in raw milk production in Oceania, restrictions on butter and skim milk powder production in New Zealand and Europe, and increased demand ahead of Ramadan likely contributed to price increases during the auction, reports Georgii Kukhaleyshvili, analyst at the Association of Milk Producers of Ukraine.
On Tuesday, February 4, the 373rd GDT auction took place, resulting in a price index of 1264, an increase of 46 points (+3.7%) since the previous auction on January 21. The average price for dairy products was $4296 per ton, $150 higher than the previous auction results1. A total of 23,854 tons of dairy products were sold, 3,931 tons less than the previous auction. The minimum offer was 23,276 tons, and the maximum was 28,103 tons. 182 market operators participated, four more than on January 21.
As a result of the auction, the price of anhydrous milk fat was $6766 per ton (+2.4%). The market situation for anhydrous milk fat remains uncertain. According to Dairy News Today, Mexico imports this product from New Zealand for re-export to the USA, but doubts arose at the end of 2024 regarding further supplies to America due to President Donald Trump's announcement of a 25% tariff on imports from Mexico and Canada at the beginning of February. However, recent agreements to delay the introduction of the tariff for 30 days in exchange for increased border protection by Mexico and Canada likely influenced buyer sentiment. Mexico buys about 10% of the anhydrous milk fat produced in New Zealand. The rise in milk fat prices may be due to reduced milk production in New Zealand in December 2024. Auction organizers predict a 2.4% increase in the price of anhydrous milk fat in March and a 2.7% increase in April.
The price of butter at the auction was $7222 per ton, a 3.4% increase compared to the previous auction. According to USDA, demand for butter in the USA is stable in retail networks and the food industry, while supply exceeds demand. Butter stocks are accumulating in the USA. The dairy market in the EU is imbalanced, with high butter prices despite increased supply during the market lull at the beginning of the year, and lower production volumes compared to last year. There is demand for large wholesale batches of butter in Europe, but sales activity in supermarkets has declined. Butter prices in Oceania are rising, and production is decreasing due to seasonal milk reduction in the region. Demand for New Zealand butter is active both in Oceania and on export markets. Auction organizers predict a 2.3% increase in butter prices in March and a 3.3% increase in April.
The price of skim milk powder was $4169 per ton, a 4.1% increase compared to the previous auction results. According to USDA, skim milk powder production is decreasing in Oceania due to reduced milk production in hot conditions. Demand for New Zealand skim milk powder has increased globally in recent weeks, likely related to preparations for Ramadan, which will take place from February 28 to March 29 this year. Significant interest in the product is expected from buyers at the end of the first quarter. In Europe, skim milk powder prices rose last week, with buyers mainly contracting for delivery in the second quarter. In February-May, skim milk powder deliveries to Algeria from dairy processing plants in Belarus and Poland are planned as a result of a tender by the ONIL procurement agency.
However, over the past few years, the supply of milk raw materials has been decreasing in Western European countries. Due to reduced import demand for skim milk powder in China, European companies have the opportunity to reduce production volumes and export the product for butter, cheese, and other products. According to the National Bureau of Statistics of China, skim milk powder imports into the country decreased by 5% in 2024, despite increased deliveries in December.
According to Rabobank, there is likely to be some activation of import demand for dairy products due to a 0.1% reduction in milk production in China over the three quarters of 2024.
According to AHDB, milk production growth in China is slowing due to reduced purchase prices, the negative impact of drought in the third quarter, and the exit of local dairy farmers from the industry. Rabobank estimates that milk production in China may decrease by 1.5% in 2025, which could increase China's dairy product imports by 2%.
The auction organizers expect an increase in the price of whole milk powder by 5.8% in March and 4% in April.
Skimmed milk powder rose to $2835 per ton (+4.7%). According to the USDA, interest in New Zealand skimmed milk powder has increased on external markets in recent weeks, which may be related to preparations in Muslim countries in Asia and Africa for Ramadan, which will last from February 28 to March 29 this year. In November, Algerian importers ONIL and Soummam announced tenders for the supply of skimmed milk powder at the end of the first and beginning of the second quarter of 2025.
The price increase is likely due to reduced butter production in New Zealand, a by-product of which is skimmed milk powder. Deliveries from Germany were delayed due to a foot-and-mouth disease outbreak in the federal state of Brandenburg. Demand for American-made skimmed milk powder is quite slow, particularly from confectionery manufacturers in Mexico. However, some market participants expect Mexican buyers to become more active later this year. The auction organizers expect an increase in the price of skimmed milk powder by 4.8% in March and 4.7% in April.
Cheddar cheese rose to $5025 per ton (+3.7%), while mozzarella cheese prices remained almost unchanged since the previous auction - $4157 per ton (-0.1%). According to the USDA, in recent weeks, demand for cheeses has increased in the USA, EU, and Oceania from the food industry, retail networks, and export markets. Auction organizers suggest that Cheddar cheese may decrease by 0.7% in March but increase by 4.5% in April. Mozzarella cheese may decrease by 0.4% in April.
Lactose slightly increased to $1050 per ton (+17.7%). According to the USDA, demand for American lactose was mixed on export markets during the Chinese New Year celebrations. However, prices are likely rising due to limited supply. In the USA, demand is quite stable, and buyers are contracting for the second quarter. Auction organizers predict a 17.7% decrease in lactose prices in April.
Dry buttermilk decreased to $3092 per ton (-0.4%). The price decrease was insignificant, indicating sufficient supply and stable demand without hype. According to the USDA, there is demand for dry buttermilk on external markets, likely related to preparations for Ramadan in the Muslim world. Buttermilk is used by bakeries as an ingredient.
The next GDT auction will take place on February 18.
Press Service of the Association of Milk Producers
Follow us on Facebook
Related News