Slow New Zealand milk start hits supply
Early season production in New Zealand is back 3% compared to last year, and Tuesday’s return to a rising GDT Price Index (up 1.4%) has confirmed the effect on markets.
The US is the only expanding milk producer, up 1.9% for the year to date, benefiting from low grain prices, but their 36% milk price cut since the highs of 2014 is set to turn the milk tide.
With the strong dollar restricting exports, American farmers are estimated to have dumped more than 43m gallons of unwanted milk in the first eight months of 2016.
Farmer expansions after a milk shortage two years ago have led to an enormous milk and cheese glut, with the US department of agriculture forced to intervene with an offer to buy $20m (€18.2m) of cheese.
Rabobank analysts have predicted continuation of the slowdown in global milk production into next year, but say that global demand remains slow.
Nevertheless, the Eurex index price for butter at over €4,200, the highest since October 2013, reflects buoyant demand for butter remains and tightening stocks.
The skim milk powder index still languishes just above €2,000, with more than 350,000 tonnes in the EU’s public intervention, overhanging the market.
The Ornua Index for Irish dairy produce has jumped from 85.8 to 92.2.
IFA and ICMSA dairy spokesmen Sean O’Leary and Gerald Quain have both said this is equivalent to a 26.6c milk price, including VAT.
Mr O’Leary said this vindicated IFA’s call for all milk purchasers to pay at least 2c/l extra for September milk, and Mr Quain accused co-ops of falling well short of market improvements, with their general 1c September increase.
The ICMSA official called on co-ops to set a base price for September of at least 27c.
Some big European milk processors have committed to significant late autumn milk price increases, of about 5c at Dairy Crest, 4c at FrieslandCampina and DOC Cheese, and 3c at Arla.
