Negative dairy market trends come to fore

By Stephen Cadogan

Increased rainfall could boost production in the last three months of New Zealand’s milk season.

Stronger supply could allow negative global market factors, such as high skim milk powder stock levels in the EU and the US, to have more effect on prices.

Analysts have questioned if the 3% annual milk slump predicted in New Zealand was too pessimistic, after rain has eased drought worries in many parts of the country.

January milk solids had fallen 7.4% behind the 2017 figure. But season-to-date milk production dropped by just 0.9%.

Improved prospects on dairy farms may explain Tuesday’s GlobalDairyTrade auction average price falling 0.5%, after three consecutive rises so far in 2018.

The skim milk powder price fell 3%, indicating the damage to markets caused by high stocks, such as the EU’s 380,000 tonnes.

Only 2,000 tonnes were sold since December 2016, at rock-bottom prices.

With overproduction of EU milk forecast for this spring, Karl-Heinz Lambertz, president of the European Committee of the Regions, has warned that the decision by the Council of Ministers on January 29 to temporarily suspend automatic buying-in of skimmed milk powder, without parallel measures to reduce production, risks triggering another crisis in the dairy sector.

The Committee of the Regions is an EU advisory body composed of locally and regionally elected representatives from the 28 Member States.

The EU decision to accept skimmed milk powder between March and September only through a tendering process means decisions on whether milk powder is bought up for intervention, and at what price, will be taken on a case by case basis.

Meanwhile, another Irish dairy industry leader has warned that the current milk price is not supported by demand in the marketplace.

Kerry Group chief executive Edmond Scanlon said the current milk price is not supported by demand in the marketplace, which is “soft” now.

Glanbia Ireland Chairman Henry Corbally had already said market returns were significantly behind their farm gate milk price, even after recent market improvements.

And Dairygold CEO Jim Woulfe warned in January that average milk prices could struggle to pass 30c/l if market returns continued as they were. However, all three co-ops left January milk prices unchanged, and Kerry announced a top-up of 8 cent per litre including VAT on all milk supplied in 2017 except in fixed milk price contracts.

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