New Zealand’s pillar dairy industry is facing a prolonged periodof low prices as the global market struggles to soak up surplus, according to a report outWednesday.
The Dairy Quarterly report from Rabobank said international dairy prices, which havefallen since the second quarter this year, were well below levels that would be sustainablein the medium term.
However, milk production had continued to expand strongly in global export regions, whileChina had pulled back from buying on the international market as it concentrated ondigesting stock accumulated in early 2014, with other buyers unable to take up the slack,Rabobank director of dairy research New Zealand and Asia Hayley Moynihan said.
«However, while a bottom appears to have been reached for New Zealand and Australianexport prices, market rebalancing will be a slow process and price recovery looks someway off,» Moynihan said in a statement.
«The next year promises to be challenging for New Zealand’s dairy producers, however thelonger-term outlook remains positive, with prices expected to return to more profitablelevels for farmers into the 2015-2016 season,» she said.
«Rabobank firmly believes the current downturn in prices is cyclical, as agriculturalcommodity prices often are, rather than a more fundamental structural change, andfarmers will work hard to ‘wait out’ the lower price cycle by trimming less-productive farmexpenditure or deferring longer term cap-ex decisions.»
Last month, dairy giants Fonterra and Synlait announced they were looking to slashpayouts to farmers on the back of weakening global demand, prompting concerns overNew Zealand’s economic growth.
Statistics New Zealand announced last month that milk powder, butter and cheese exportsto China fell 35 percent year on year in August, although China remained the topdestination for dairy products, taking 14 percent of the total.
The Federated Farmers industry group maintained the falling prices were due to anunusually good global production season in the first half of 2014, which put an extra 7billion liters of internationally traded milk on to the market.
Goldman Sachs reportedly forecast earlier this year that annual global dairy output wouldexceed demand by 2 billion liters through to 2018 a five-year glut that would depressprices.
Source: English People Daily
