Increased milk production in EU is depressing world markets

The finger is now firmly pointed at Europe as the source of growing dairy supplies depressing world markets.
Increased milk production in EU is depressing world markets

As prices in Tuesday’s GlobalDairyTrade auction dropped for the third time in a row, falling 7.9%, sources at Fonterra, New Zealand’s dominant milk processor, said production from major regions was declining, with the exception of Europe.

“The drop in milk output from New Zealand in recent months has been matched threefold by the increase in production from Europe,” said a spokesperson.

Fonterra has revealed a drop of 4.2% in its milk collections in October, the peak month for New Zealand output.ICOS sources said an annual decline in New Zealand milk production of the order of 5% is priced into the market.

US milk production was up by only 0.4% for September, although the January to September supply is still running at 1.4% up.

EU production is running at about 1% up on last year, with strong UK, Irish, Belgian, Danish and Dutch supplies, coupled with a resurgence in Germany and a levelling-off in France.

According to ICOS, current EU dairy markets justify a milk price of only 23c per litre.

European Commission figures show Ireland, Italy, Sweden and the UK filling the allowances in the first three weeks of the EU’s Private Storage Aids scheme for cheese, another symptom of depressed markets.

There were protest actions by milk producers in numerous EU countries on November 12, demanding milk prices that allow them to cover costs.

Despite the market gloom, Fonterra (the world’s top milk exporter), along with French dairy giant Danone, and Rabobank, the leading global agri-bank, all predict a dairy market revival in the first half of 2016.

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