Dairy industry expert Stu Davison offers perspectives on the present condition of the dairy sector, highlighting a notable decline in auction prices for milk powder.
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The latest Global Dairy Trade Event 352 concluded with a 2.8% decrease in the GDT Price Index, signaling a significant downturn, especially in China. China's milk powder market share has dropped to its lowest point in a decade, prompting increased interest from buyers in Southeast Asia and Oceania.
According to Davison, this decline is primarily attributed to China's weak demand for milk powder due to oversupply domestically and reduced prices. Consequently, there has been a reduction in dairy cow numbers to rebalance the market. Skim Milk Powder (SMP) experienced the most significant decrease at 4.8%, followed by Lactose (LAC) at 4.4%, and Whole Milk Powder (WMP) at 4.2%. However, Anhydrous Milk Fat saw a positive market movement, rising by 2.5%, while Cheddar (Ched) decreased by 1.9%, Butter by 1.4%, and Mozzarella (MOZZ) by 1.0%.
The discussion delves into a detailed analysis of the dairy market's fluctuations and predictions regarding Fonterra's interim results, potentially affecting milk price forecasts. Davison foresees a narrowing of the price range, suggesting that the likelihood of reaching or exceeding eight dollars per unit is diminishing unless Fonterra implements significant cost-saving measures.
The conversation underscores the dynamic nature of both dairy economics and Formula One racing, emphasising the importance of strategic planning and adaptability in addressing their respective challenges.