NZ on course for record milk

Irish Examiner - Farming - - NEWS - Stephen Cado­gan

With milk pro­duc­tion in New Zealand on course for an all-time high, Tues­day’s first gain since last May in the GDT Price In­dex might be a mixed bless­ing for EU milk prices. Since the sum­mer, Global Dairy Trade auc­tions have seen the in­dex drop by more than 20%.

But when 36,450 tonnes of prod­uct were auc­tioned on Tues­day, the mar­ket de­liv­ered a 2.2% av­er­age rise.

The price for the key prod­uct in New Zealand, whole milk pow­der, ad­vanced 2.5%, hav­ing fallen about 19% since May.

That is likely to ease the milk price wor­ries of farm­ers down un­der, and drive them on to set a new milk pro­duc­tion record.

With New Zealand the world’s eighth largest dairy pro­ducer, and 95% of the prod­ucts made from New Zealand milk ex­ported, it has a huge bear­ing on world prices. Milk price fore­casts in New Zealand for the cur­rent sea­son have re­cently tended down­wards, but the GDT gain may en­cour­age Fon­terra, the main buyer of milk in New Zealand, to an­nounce a more favourable than ex­pected milk price fore­cast to­day. That would con­tinue the coun­try’s faster than ex­pected milk pro­duc­tion growth, al­ready 6% ahead of last year, thanks to gen­er­ally favourable weather (and ris­ing, with milk pro­duc­tion in Oc­to­ber 6.5% higher than a year ago). Record New Zealand milk pro­duc­tion will keep a lid on a global mar­ket boosted this week by an eas­ing of Us-chi­nese trade ten­sions, which prom­ises to main­tain the Chi­nese de­mand on which dairy ex­port­ing coun­tries de­pend. The in­creased NZ milk pro­duc­tion, although now past its an­nual peak, is can­celling out a short­fall in Aus­tralian pro­duc­tion com­pared to a year ago, and the slow­ing of EU pro­duc­tion due to the sum­mer drought.

But falling crude oil prices since early Oc­to­ber, and global eq­uity mar­ket wob­bles are un­help­ful for dairy prices. On the plus side, the con­tin­u­ing run­down of EU skim milk pow­der (SMP) stocks can sup­port prices. EU Com­mis­sioner Phil Ho­gan told the ICMSA AGM last week in Lim­er­ick the SMP stocks will be elim­i­nated by mid-2019.

In the Global Dairy Trade event on Tues­day, a 0.3% rise in the SMP in­dex showed some life left in that mar­ket, and the but­ter in­dex gained 2.7%.

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