Strong production, tested demand send milk prices crashing
Strong global milk production and rebalancing of demand among key buyers has delivered one of the biggest drops in whole milk powder prices in recent years.
Last week’s Global Dairy Trade (GDT) auction index fell 2.4% for the sixth consecutive time. Flagship whole milk powder (WMP) prices dropped 2.7% to US$3,503/metric tonne. In August WMP price was selling at US$4,036/MT.
NZX head of dairy insights Cristina Alvarado says the results came broadly in line with market expectations, confirming the ongoing bearish sentiment across global dairy markets.
“The result reflects a market weighed down by abundant milk supplies from New Zealand, Europe, the US and Argentina, while demand has softened following heavy buying earlier in the season.
“With product deliveries now well aligned to the Christmas, New Year, Chinese New Year and Ramadan periods, buyers appear content with existing coverage, leading to reduced participation and lower clearing prices,” she says.
WMP’s price drop marks the fifth consecutive fall in GDT Events. WMP exports have been robust, with New Zealand volumes up 12% year on year in September, suggesting that much of the product has already been contracted.
Alvarado says buyers continue to purchase on a hand-to-mouth basis rather than building inventories – a trend consistent with subdued demand from Southeast Asia and Oceania.
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North Asia once again dominated the auction, accounting for 53% of total demand (down from 55% at the previous event), while participation from other regions remained limited.
Skim milk powder (SMP) held steady at US$2,559/MT, supported by signs of stabilisation following several months of correction.
Nevertheless, competitive European pricing continues to weigh on sentiment, with SMP from the EU still trading at a discount to New Zealand product, says Alvarado.
The global butter market remains oversupplied, particularly as Europe and the US continue to report strong production and aggressive export activity – US butter exports in July were up a striking 208% year on year.
Overall, the auction outcome underscores the current supply-heavy environment, with ample product in the global pipeline and restrained purchasing from key importers, says Alvarado.
“Futures markets had largely priced in this result, and with milk flows peaking across major exporters, the near-term outlook remains soft.
“Attention will now turn to early 2026 demand signals and potential restocking in the new year to determine when market sentiment might begin to turn.”
