Following two consecutive increases in September, the Global Dairy Trade overall price index followed its usual trend for 2022, falling 4.6% to US$3723/t at the October 18, event.

This follows a 3.5% decline earlier in the month, but two consecutive increases in September. Since March 15, 12 out of the 15 events have had a decline in the overall price index driven by reduced worldwide demand, according to those in the know.

Although the platform trades products to and from multiple countries, the biggest driver is product going from Oceania to China, particularly whole milk poweder.

According to AHDB, Chinese imports have been notably down this year, from a combination of reduced demand due to a strict covid restrictions, and improvements in domestic supply and self-sufficiency. Additionally, reports suggest that South-East Asian buyers bought less than expected in October, as they are already well stocked for the final quarter of the year and can afford to wait for further price drops.

Global milk production is also expected to drop by 0.5% in 2022 across the key producing regions according to the latest forecasts. This is in line with expectations earlier in the year, although there have been shifts in individual outlooks.

Both Australia and New Zealand are projected to perform worse than had been expected in the mid-year forecasts, as is Argentina. For these southern hemisphere countries, the reductions are due to a combination of factors, including unfavourable weather conditions, poor grass growth, labour shortages and high input costs.

According to the summer forecasts, the combined production from these three regions was expected to reach 41.3billion litres in 2022, 0.7% lower overall than the previous year. New forecasts, updated to account for the poor start to their seasons and continued weather challenges, now suggest a combined production figure of 40.7bn litres. This is 2.2% down from 2021 and 642m litres less than previously expected.

Meanwhile, the latest USDA forecast for 2022 milk production has shifted from a reduction (-0.1%) to growth (+0.3%). This is linked to expansion of the dairy herd and improved yields in the second half of the year.