Global milk production is expected to tighten during Q4 2021. As a result, the global milk supply growth forecast for the 2021 calendar year has fallen from 1.4% to 1.0% year-on-year, equivalent to 1.1bn litres. Both the US and the EU have cut their forecasts for the 2021 production in their latest outlooks, to 1.7% and 0.3% year-on-year, respectively. Challenging weather and high feed costs are expected to impact the EU milk production, while the US milk production drop is due to a decline in both cow numbers and milk yields.
Therefore, lower milk supplies have kept upward pressure on international dairy prices. The Global Dairy Trade index rose by 2.2% at the 294th auction (19th October 2021). Compared to the previous auction (5th October 2021), the largest increase was for lactose, up 5.9% to USD 1,258/MT and butter, up 4.7% to USD 5,111/MT. Cheddar increased by 2.9% to USD 4,426/MT, while AMF and SMP both recorded increases of 2.5% to USD 6,151/MT and USD 3,401/MT, respectively. With only 27,836 tonnes sold at the auction, lower than the last five-year average, and strong price gains across each contract period of each commodity, a tight supply is expected for the New Zealand 2021/22 milk season. Also, in the US all spot prices reflected the same upward trend, finishing higher week-on-week for all dairy commodities on Friday 22nd October.