Newshub reports indicate that there are signs of weakening demand for dairy products, with auction prices for whole milk powder reaching a five-year low.
As of August 15, the Global Dairy Trade Price Index for New Zealand has dropped by 7.4%, compared to the previous value of -4.3%.
It is reported that, in the latest GlobalDairyTrade auction, the average price of whole milk powder overnight plummeted to $2,864 per ton (4,830 New Zealand dollars), marking the lowest level since June 2020. The weighted index for whole milk powder decreased by 8% from the previous auction, while the weighted index for all dairy products dropped by 4.3%.
The global dairy auction prices, dominated by New Zealand dairy industry giant Fonterra, are considered a barometer for the global trend in dairy prices.
Softening demand and increased production have led to a nearly 40% decline in the average price of whole milk powder compared to the record high of $4,757 per ton (NZD 7,988.85) in March 2022.
Nathan Penny, Senior Economist at Westpac New Zealand, stated last week that the downward trend in global dairy prices has lasted much longer than anticipated.
Richard McInytre, Chairman of Federated Farmers Dairy Company, expressed that the sharp decline in prices is putting significant pressure on farmers and dampening morale.
He noted that the decrease is much higher than expected.
While prices exhibit cyclicality, the impact of high interest rates and declining commodity prices is affecting agricultural balance sheets.