‘Milk prices should remain stable for the remainder of H1’
“All of the indicators in the market suggest there is a softening in global trade auctions,” Mr McCormack said. “However, the Irish Dairy Board Index has been fairly solid in the last number of months, going very close to a record high on occasion.”
The February 2014 IDB index remained practically unchanged at 133.5 points. This is only 0.2 points down from the highest ever reached of 133.7 points in September 2013.
“We see no change in the price for the first half of this year. We see 39c per litre as being achievable. Processors have had a very good year, and we feel they will have to be as slow moving south with the price as they were in moving it north.
“What happens in the next six to eight weeks in terms of the supply will dictate the third-quarter price. People may be talking about the global price easing, but we certainly don’t agree with that view here.”
The Rabobank Q2 Dairy Quarterly report anticipates an easing of global milk pricing from mid to late-Q2 2014. It states that exportable supply rose strongly in Q4 2013 and is expected to continue into early 2014 as producers respond to improved margins through high milk prices and falling feed costs.
For the EU, Rabobank expects production to rise by 4% during the first half of 2014 versus the first half of 2013, fuelling a surge in exports. Fractional growth in 2H 2014 will be boosted in 1H 2015 when current quotas are eliminated and the EU, boosting international supply and putting pressure on milk prices.
In December 2013 and January 2014, supplies were up 2.7% in Germany, 0.8% in France, 3.3% in UK, 3% in Denmark, 6.2% in the Netherlands and 1.4% in Poland. However, in China, FMD and other factors drove down cow numbers and pushed supplies down by around 6%.
Rabobank analyst Tim Hunt said: “The most crucial demand side question is whether China will sustain the frenetic buying we have seen on the international market throughout the last 12 months.”
The bank’s report suggests the US domestic growth will be modest, while US dairy exports are expected to growth during H1 2014.
It predicts New Zealand’s production will rise 20-30% to May 2014 versus the end of 2013, with exports up 10% versus H1 2013.
“This time last year, world supply was in decline, right up until the first half of 2013,” recalls Pat McCormack. “We are always exporting our product, so we are always dictated by supply and demand. The global supply is up around 0.5%, Sbut what effect that will have is the question.
“We don’t know yet what effect the end of the quota will have, but we do not see any softening in price for the first half of 2014.”
