Milk prices fore­cast to re­main high: Rabobank

Matamata Chronicle - - Rural Delivery -

Dairy farm­ers could find milk com­mod­ity prices soften from their record high over the next year, but this might not flow through to their milk pay­outs un­til the 2014-15 sea­son, says Rabobank.

The way ahead will hinge to a large de­gree on Chi­nese buy­ing, which shows no sign of let­ting up ini­tially as milk prod­ucts are scarce in the mar­ket­place with wholemilk pow­der at a record US$5000 (NZ$6149) a tonne.

Al­most cer­tain to have a bear­ing over the next year will be ex­tra milk pro­duc­tion from United States feed­lot farm­ers who are ex­pected to take ad­van­tage of lower grain prices. Rabobank’s Hay­ley Moyni­han said a dra­matic fall was not ex­pected in com­mod­ity prices in the short term as de­mand re­mained high in spite of record prices, but those prices would not last for­ever and more volatil­ity could not be ruled out.

Prices have risen steeply from a year ago when wholemilk pow­der was sell­ing for US$3200/t. At that stage there was a sur­plus from Kiwi farm­ers hav­ing a great fin­ish to the 2011-12 sea­son and more milk com­ing from the US and Europe.

The dra­matic turn­around re­sulted from milk sup­plies fall­ing be­cause of dry spells in Aus­trala­sia, a long Euro­pean win­ter and high feed costs in the US caused by a drought in its corn belt this time last year.

Rabobank is work­ing on its rolling yearly view of the dairy mar­ket in its quar­terly re­port due out on Fri­day.

Chi­nese milk pro­duc­tion has been iden­ti­fied as not grow­ing as much as ex­pected be­cause of a se­vere win­ter and is­sues with live­stock health and is ex­pected to rely on more im­ports for its do­mes­tic needs. Chi­nese milk pro­duc­tion from small-scale farm­ers was de­clin­ing faster than pro­duc­tion was in­creas­ing from larger-scale farm­ers. Moyni­han said the ev­i­dence from China was, de­spite there be­ing no of­fi­cial num­bers, that de­mand was strong and this had helped to hold up prices.

She said Fon­terra’s bac­terium scare seems to have made lit­tle dent in milk de­mand.

‘‘We track ex­ports from the big six ex­port­ing re­gions and there is less prod­uct, hence higher prices be­cause there has been scarce sup­ply. Where we see things go­ing now hinges on how much milk is pro­duced from New Zealand and the US mainly be­cause they are the two key ex­porters where prod­uct is ex­pected to in­crease.’’

Milk pro­duc­tion is in­creas­ing in the US be­cause lower grain prices and im­proved yields will as­sist farm­ers buy­ing stock feed.

New Zealand pro­duc­tion was run­ning higher than ex­pected due to re­cent mild con­di­tions.

The ef­fect of more milk on prices re­mained to be seen over the com­ing year, but the in­di­ca­tions were they would re­main firm un­til Christ­mas.

In­dia had a rea­son­able mon­soon sea­son and its milk mar­ket was in bal­ance, only ex­port­ing a small amount, while the growth rate of de­vel­op­ing na­tions was slow­ing mod­er­ately, but would have some im­pact on de­mand.

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