What we’re seeing this week

22 June 2022

Another GDT event, with a slight downward overall trend in prices. We explore the context for the price movements, with global market slightly softer or moving sideways in recent weeks. The big drop at this auction was for cheddar – dropping almost US$500/t on average. The volumes of cheese sold on GDT are small and its processed cheddar…. But some cheesemakers may be feeling nervous.

Meanwhile, we take a look at what’s happening to southern Australian milk values. We have adjusted our commodity milk value to reflect spiralling conversion costs – particularly for energy, and break down what that means. Cheese is the most important dairy product for the Australian dairy industry so given where opening prices are for 2022/23, many local cheesemakers will be hoping the GDT trend isn’t replicated in the wider market.

Chart of the week 

Reduced product availability continued to peg EU-27 exports in April with only (surprisingly) butter and IMF trade staying ahead of the prior year comparative. Heaviest falls in milk powders – SMP trade was 21% lower, but the monthly tonnage was higher than the average over the previous 7 months. Exports over the past 6 months were 18% weaker.

Cheese trade appeared resilient, down just 6% in the month but over the previous 6 months was only 3% behind the prior year. Improvements in exports to the most important revival markets of the UK and US continued – even though the monthly shipments to the UK dipped below the average over the past year but looked better than a year earlier.

Butter exports were 3% above the prior year, as well for the previous 6 months.

IMF exports could be showing some benefit of shortages in the US market, which could look even better in the next 2 months, posting the 4th consecutive month of growth. But with the weaker demand from China, it’s still a long way back in this category which was 8% lower than the prior year on an annualised basis.

Imports were generally weaker, with cheese trade 8% weaker, declining for the 2nd month.