Improved New Year milk price prospects

Glanbia has offered fixed milk prices at 30.1 cent per litre from January 1, 2017 to December 31, 2019, or at 31.75 cpl for 2017.

The prices, for 3.6% fat and 3.3% protein, including VAT, indicate improved dairy market prospects compared to the past 18 months.

Improving price prospects are seen at the other side of the world also, with New Zealand’s Ministry for Primary Industries predicting booming dairy export revenues, mostly due to the milk price in New Zealand increasing by an expected massive 87% from 2016 to 2021.

Milk price expectations are more muted in the EU, with officials in Brussels predicting EU milk prices cannot go above 32 cents until 2018, because accumulated intervention stocks of skimmed milk powder being released onto the market will limit the price upturn.

Intervention helped EU farmers in 2015 and 2016, by soaking up nearly 2.5 billion litres of milk protein equivalent, but officials say it will take two years or more to sell the 355,000 tonnes of intervention powder.

The European Commission recently started the process of gradually releasing intervention stocks, but there have been few early takers for the first tranche of the stockpiles, when 22,000 tonnes was offered recently.

However, it was encouraging for the Commission that skimmed powder prices were unchanged Tuesday, in the last GlobalDairyTrade auction of the year.

An overall auction price fall of 0.5% from the 17-month highs at the previous auction was attributed to Chinese buying easing off after a rush to take advantage of a low-tariff window.

But analysts interpret this as a market lull rather than a longer term setback, with favourable supply and demand trends foreseen.

Milk flows across Europe have dipped 5-8% in the UK, France, and Germany.

Phosphate restrictions are expected to reduce 2017 milk flow in Holland, one of the few European countries that has continued to expand.

Bad weather has hit the milk supply in New Zealand, down 5.5% in October, and many dairy farmers there have little cash to buy the extra feed needed to drive milk production.

The latest forecasts in Australia point to a 20-year low in milk production next season, due to prolonged dry conditions and low milk prices.

Only the US is expected to continue milk output growth in the foreseeable future, likely to be 1.7% in 2017, due to improving prices and low feed prices.

But growth under 2% in the US is likely to be absorbed by internal demand growth. Also, the strong dollar restricts exports.

On the global dairy demand side, oil prices are creeping up after producer countries agreed to curb output by 600,000 barrels a day, boosting the dairy product buying power of oil exporters.

Although uncertainty over Brexit and the Trump Presidency in the US could interfere with market forecasts, the European Commission foresees strong export trade over the next decade, driven primarily by demand from China and Africa.

The Commission foresees rising EU milk yields, but a declining EU dairy herd — with the exception of Ireland.


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