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Insights May 2022

9 May 2022 |Dairy
Dairy cow image

Insights May 2022

9 May 2022 |Dairy
The May update provides an analysis of production and pricing trends for Australian dairy producers. It provides producers with a timely overview of current trends and an outlook for the coming months.

Commodity Overview:

  • The Global Dairy Trade Index declined a further 8.5 per cent in April to US$1,379 per tonne whilst SMP and Cheddar prices declined
  • 10.2 and 12.7 per cent respectively.
  • Lower global prices are largely a result of weaker demand and supply chain issues stemming from COVID lockdowns in China.
  • Bega has announced an opening price of $8.40/kg MS for the upcoming 2022/23 season alongside a step up of 10c/kg MS.

US milk production fell 0.5 per cent year-on-year in March according to the USDA. The national herd grew by 15,000 head from February however despite this addition, the herd remains 0.9 per cent smaller year-on-year. This decline is similar in New Zealand with March production dropping 1.5 per cent year-on-year which is the eighth consecutive month of decline.

The first Global Dairy Trade (GDT) auction for May saw the GDT Index decline for the third consecutive auction. The index declined by 8.5 per cent from the previous auction to US$1,379 per tonne. This is largely attributed to lower demand from China as it deals with lockdowns which is also affecting supply chains. Skim Milk Powder (SMP) prices declined by 10.2 per cent month-on-month breaking a run of consecutive gains dating back to the second July auction of 2021. The SMP price now sits at US$4,130 per tonne. Cheddar prices also saw a similar decline as it dropped 12.7 per cent month-on-month to sit at US$5,652 per tonne. Whilst there was a sharp decline in the auction results for April, it should be noted prices remain much higher year-on-year. Cheddar prices are currently 32.2 per cent higher than a year ago while SMP prices are up 20.3 per cent.

The outlook for Australian farm gate prices remains strong. Bega has announced a record high opening price for the upcoming 2022/23 season of $8.40/kg MS. Expectations are that most producers will receive between $8.20-8.60/kg MS. This was announced alongside a step up of 10c/kg MS for suppliers across Southern Australia. The step up is being retrospectively applied across the full 2021/22 season.  

 

Sources: Global Dairy Trade, Dairy Australia

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