By Stephen Cadogan
Confirmation from New Zealand that drought will set back the annual milk supply by a predicted 3% has helped to strengthen weakening global markets for dairy products.
Milk volumes were down 6% in December compared to 12 months previously at Fonterra, which processes 95% of New Zealand’s milk, and generates 30% of the world’s dairy exports.
Fonterra predicts 2017-2018 milk production will be 3% behind 2016-17, a season which was also negatively impacted by weather conditions.
The reduction in dairy product supply from New Zealand was reflected in Tuesday’s Global Dairy Trade auction, where average prices increased 4.9%.
The price of butter, New Zealand’s second most important dairy export product, jumped 8.8%.
Market analysts say reduced production in New Zealand will counter the global production growth led by Europe and the US, and the disposal of around 370,000 tonnes of skim milk powder in EU intervention stocks.
In some parts of New Zealand, milk production has been set back as much as 20%, and a lot of feed is being brought in to farms.
December milk supplies fell 8% in New Zealand’s North Island, but there was better news for Fonterra in Australia, where national milk production is forecast to increase 2.7%.
Meanwhile, Lakeland Dairies, Glanbia Ireland, Dairygold and Arrabawn are among the co-ops which have announced no change in milk price for December supplies — despite Ornua’s purchase price index falling to 111.3 for December, from 115 in November.
This returned the index to its level of level of last August, after peaking in October.
Kerry’s December milk price includes a 1c/l butter bonus.
Glanbia has also agreed to pay a 1.1c/l (including VAT) bonus on all milk supplied from July to December of 2017. Announcing the December milk price, Glanbia Ireland Chairman Henry Corbally said: “Current market returns are considerably lower than our milk price, therefore price adjustments would seem inevitable over the coming months”.
IFA Dairy Chairman Tom Phelan said other co-ops must ensure their suppliers are not left behind, after Carbery and Glanbia had topped up 2017 milk payments.