Flood of milk may hit dairy prices
They reported prices losing some ground during October, reflecting slightly weaker market sentiment.
However, Fonterra world auction prices remained firm last week. The Fonterra global dairy trade auction, at the start of September, and buying interest from Russia and Algeria, turned the market, said Dutch analysts.
Previously, buyers were postponing purchases, but prices firmed.
Now, milk-supply growth in all exporting regions threatens price prospects. In the near future, the southern hemisphere milk-production trend, and demand from importers like Russia and China, would determine prices.
With Fonterra setting a new record last week for the most milk processed in a single day (76.8m litres), thanks to recent fine weather, and US production up 1.8% year on year, markets may come under pressure.
US exports for the first seven months of the year increased 7.7% for butterfat, 61% for cheese, 31% for dry whey, and 14.5% for non-fat dry milk/skim milk powder – boosted by dollar weakness.
This has boosted American dairy product prices, and, despite the unfavourable exchange rate, dairy farmers there are now paid more per litre than most Irish suppliers, enjoying prices that were exceeded only in the 2007 and 2008 dairy booms.
As a result, US June-to-August milk production was up 2.7% year on year, nearly twice the historical growth rate. Provisional data for September showed a further 3.3% increase.
However, higher feed costs this winter may result in higher culling, less feeding, and slower expansion. And the US Department of Agriculture expects some weakening of milk prices into early 2011.
