Upbeat response to result of latest GDT

He added: “It is a sign that demand remains positive for key products. Indicators show that there is more optimism as we progress into 2018.

“However, production continues to rise and there are concerns regarding the continued levels of skimmed milk powder in European Commission stores. Indicators are showing that demand for milk could be sufficient to counter any significant rise in milk production.

“I will be attending a COPA Milk Working Group and European Commission Civil Dialogue meeting in Brussels on the 19 and 20 February where skimmed milk powder interventions stocks will be high on the agenda.”

The overall GDT Price Index increased by 5.9% at the latest event, after a 4.9% increase recorded at the previous auction, held in mid-January. All the specific product categories featured at this week’s event reflected a strengthening demand. Whole milk powder (WMP) prices increased by 7.6%; Skimmed milk powder (SMP) returns increased by 7.2%; butter prices increased by 7.9% while cheddar cheese returns went up by 7.2%. WMP makes up roughly half of the product sold, while SMP accounts for about a quarter.

According to AHDB Dairy, New Zealand milk production for the June 2017-May 2018 season is expected to be down by 1.5% on the previous 12-month period. This would bring the country’s 2017-18 production level to around 20.4bn litres.

Although the season-to-date production is up 0.4% on the year in milk solids terms, it is anticipated that milk intakes for the rest of the season (January-May) will be 4% below the same period last year. While wet weather impacted the start of the season, it is dry conditions that are the current issue.

An AHDB spokesperson said: “This continued struggle with production has improved milk price sentiment in New Zealand. NZX dairy futures for September 2018 and 2019 have lifted over the last month.

“With reduced production and upwards price pressure, New Zealand may find some competition on the export markets, particularly as other key exporting regions like the EU and US have increased production this season.”

In Algeria, for example, this issue is already manifesting itself. New Zealand WMP exports to the country were down 39% year-on-year for the 11 months January to November 2017, while EU WMP exports to Algeria were up 116% for the same period.

Meanwhile, Irish Farmers’ Association National Dairy Chairman Tom Phelan confirmed that the first three GDT auctions of 2018 have resulted in an 18% butter price increase, a 17% lift in WMP prices, and 15% for SMP.

He added: “Ornua has maintained its Purchase Price Index at 111.3 points for January, stable from December. While dairy prices remain lower than at the height of 2017, the signals are less negative than even a few weeks ago. This must give milk buyers the confidence to keep holding milk prices for January, and later into the spring.”