International milk prices soften again in May

After an initial uplift in milk prices at the start of 2015, international milk prices have softened again over the last couple of months.

Adjusting farmgate prices from across the world to mirror average Irish milk butterfat and protein averages of 3.90% and 3.35% respectively , we find;

Friesland Campina started the year with a farmgate price in the range of 29.24c/L. This price increased to 32.86c/L by March. Both April and May saw two consecutive prices drops, with May’s farmgate settling at 30.03 cents per litre. Friesland Campina stated that the reduction of the guaranteed price is based on the expectation that milk prices of most reference companies in May will continue to decline.

“This is caused by slightly decreasing quotations of various dairy products because of an increasing milk supply and a stable demand for dairy products,” it said.

Fonterra’s forecast cash pay-out prices (Milk Price Plus Dividend) remained unchanged from December 10 2014 to April 30. A strengthening Kiwi dollar help show an increase in milk price value when converted into euros. At the end of April Fonterra dropped this forecast prices NZ$4.80 per KG of Milk Solids, which is equivalent to 23.10c/L.

Following the latest price drop Fonterra Chairman, John Wilson noted the reduction reflected the continuing and significant volatility in international dairy commodity prices caused by over-supply in the market.

Fonterra CEO, Theo Sperings added that geopolitical unrest in the Middle East, North Africa, and Russia are also having an impact on global demand, adding; “Remote as they are, events such as the flow of refugees from Libya to Europe come together with factors like lower oil prices to soften dairy demand,”

USA Class III milk prices fell about close to one-euro cent in April, to 33.05 cents per litre.

GDT Whole Milk Powder auction prices have fallen by US$882 per tonne since February. The current WMP auction prices is approximate 19.91c/Le (WMP prices after processing costs have been deducted).

The graphs below show the related milk prices trends over the past twelve months.