Insights June 2022

Commodity Overview:

• Opening farmgate milk prices for the 2022/23 season have been announced and range from $8.25-9.00/kg MS.
• While the Global Dairy Trade index saw its first increase since March, cheddar prices continued to fall in the last month.
• Australian milk production in 2021/22 is tracking 3.5 per cent lower year-on-year.

Record high opening farmgate milk prices have been announced for the 2022/23 season with an average of $8.71/kg MS. Throughout the month several price revisions were made, pushing the prices to record levels, reflective of strengthening market conditions. Export-heavy Fonterra led the market with an average price of $9.00/kg MS due to the strong demand to secure supply. Overall, the average price sits 23.5 per cent higher year-on-year. While this will be welcomed, profitability margins may remain flat due to increase input costs. A recent study by Dairy Australia showed farmer sentiment remains high with 82 per cent of operators positive about the outlook for their business.

The Global Dairy Trade (GDT) auction on June the 7th saw the GDT Index increase after five consecutive declines. The index increased by 1.5 per cent from the previous auction to US$1,359 per MT. Butter, butter milk and skim milk powder continued to be highly sought and rose 5.6 per cent, 4.5 per cent and 3.0 per cent, respectively. Whole milk powder price decreased by 0.3 per cent, while cheddar continued to fall, with a 3.6 per cent drop, now at US$5,365 per MT. Cheddar prices remain high year-on-year, up 33.1 per cent, although inflation appears to be stunting demand. China’s lockdowns and stock piling are a factor to cheddar and whole milk powder price decreases, with further falls expected.

Global Milk supply has remained tight in the last months and will continue to do so going forward. Australian milk production in April was 6.6 per cent lower year-on-year. Reduced production was greatest in Gippsland and Tasmania. Season to date production is tracking 3.5 per cent behind the previous season. Europe, the US and New Zealand have seen year-on-year raw milk production in April down 0.9 per cent, 1 per cent and 5.2 per cent respectively. New Zealand’s ninth consecutive decline comes from below average rainfall causing feed deficits.

Sources: Global Dairy Trade, Dairy Australia