POST Online Media Lite Edition


Milk tap will be slow to turn back on

Staff Writer |
According to Rabobank, with declines in global milk production, dairy farmers may be unable to satisfy, or slow to react, to any strengthening in demand from domestic markets.

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Adverse weather conditions, low farmgate prices and fewer cows have contributed to milk production falling in Europe, Oceania, China and Latin America.

Rabobank is forecasting EU milk production to fall by 2% during 2H 2016 and 0.5% in 1H 2017. This is due to the milk supply reduction scheme, reports of poor silage quality in Ireland, and France recording one of its worst harvests, suggesting that both the quantity and quality of winter feed is questionable.

The U.S. is expected to continue increasing production, though it will have to rely on some of its stocks to meet increasing domestic demand.

Forecasted milk prices in New Zealand for the current season should help push farms back towards making a small profit. Though the majority of this uplift will not be realised until Q2 2017 due to cash flow, and expansion in NZ will be limited by farmers offsetting losses incurred in previous seasons.

Overall, any recovery in prices is expected to be moderated by high levels of stocks of product in the US and Europe and lacklustre demand from oil dependent economies.

Also, according to Rabobank, Chinese imports are currently being driven by reducing supplies rather than rising demand (which appears to be slowing down).

Consequently, Rabobank views the price recovery as sustainable but the level of increase will be limited by global demand, which is described as weak.

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