Prices paid to milk suppliers fell by 12% in June after peaking in April
The bank’s analysts said prices paid to milk suppliers peaked to record levels in April, but were down 10%-12% in June.
In Ireland, co-ops reflected this global trend by paying prices of 38cpl and above during May.
Rabobank is predicting that the likely reduction in global prices will be gradual. Prices are expected to drift downwards as supply improves over the next two quarters, but change is unlikely to be dramatic. The bank says these changes will deflate rather than puncture milk prices.
Rabobank global strategist Tim Hunt said: “Seldom has a rally in international markets appeared so supply-side driven as this one. A loss of momentum in milk production growth was expected following an unattractive milk-to-feed cost ratio in late 2012, but this has been exacerbated by atrocious weather in key growing areas in the first half of 2013. In the Northern Hemisphere a cold and wet winter was followed by a late arriving spring, while Oceania saw a summer drought.”
The bank is predicting that milk production will return to growth in the key export regions during the latter half of this year as more ‘normal weather’ conditions are expected to prevail combined with feed costs easing. During the second half of 2013, milk supplies are expected to grow by 1% in the US, the EU, New Zealand and Australia. Slightly stronger growth in supplies is anticipated in Argentina and Brazil.
Bord Bia analyst Peter Duggan notes that the strongest source of international buying in the first half of 2013 came from China and Russia.
This trend is expected to continue as growth in both the US and European economies remains quite weak. In the first four months of 2013, Chinese imports grew by 27% in milk equivalent terms.
They reflected a harsh winter in China and the phasing out of small farms and market shortfalls. In Russia, imports during the first four months were 82% higher for butter, 15% higher for cheese and 10% higher for powder as a harsh winter and higher feed costs affected output.
Mr Duggan said: “While milk supplies are expected to grow over the next year, the drawdown in stocks over the last year is expected to leave export surpluses just 2% higher in 1H 2014 compared to 2012 levels. This is hardly enough to keep up with the long-term growth in demand across deficit regions.”
Rabobank says milk production will return to growth in the key export regions during the latter half of this year as more “normal weather” conditions are expected to prevail combined with feed costs easing.
During the second half of 2013, milk supplies are expected to grow by 1% in the US, the EU, New Zealand and Australia. Slightly stronger growth in supplies is anticipated in Argentina and Brazil.
