GDT Continues to Soar, Aussie Output Drops
February 15, 2022
Today’s Global Dairy Trade (GDT) index climbed 4.2%, its third consecutive jump of 4% or more. Large gains in whole milk powder (WMP), skim milk powder (SMP), and butter prices mainly drove the increase. All products traded higher than the previous event. GDT SMP prices are now 34% higher than they were a year ago and 67% greater than five years ago. With milk production in Oceania faltering and world demand brisk, odds are prices at the GDT still have room to run even higher.
Like their New Zealand counterparts, Australian dairy producers continue to struggle. Milk production on the continent fell 1.2% in December, according to Dairy Australia. For the 2021-22 season through December, output was down 2.1% from same period in the previous season. Dairy Australia, which had initially projected that this season’s output would be flat to up 2%, revised its milk collection estimates higher for each month beginning in July and ending in November, which resulted in milk collections just 0.2 percentage points higher than its initial estimates. Despite these revisions, Australia’s season-over-season production has still fallen short of last year in every month this season.
Excessive rains have hampered Aussie milk production. Earlier this month, a once in a 200-year flood damaged critical infrastructure in southern Australia, including the only rail line servicing Western Australia. The damage prevented supplies from reaching grocery stores, where many dairy shelves in the west sat empty.
Australia’s dairy sector has suffered through adverse weather for years. A prolonged drought reduced milk production for several seasons, and the industry is still struggling to recover. Australia’s July through December milk output represents the slowest start to the season in decades.
In the United States, dairy product values followed the GDT higher. Strong advances in the spot butter and powder markets propelled nearby Class IV futures higher. Yesterday and today, April Class IV futures traded above $25/cwt. If that price were to hold, it would be the highest monthly Class IV settlement ever.