The largest drop was New Zealand, with a decline of 26 per cent from last June.
Since February NZ farmgate prices have dropped 6 per cent, 4 per cent in Australia and remained the same in the US and EU.
Dairy Australia reported a decline in the farmgate milk price outlook, squeezed the margins of New Zealand dairy farmers with this season’s price of $NZ3.90kg/MS the lowest since 2006-07.
New Zealand production is expected to drop about 3 per cent, to 21 billion litres, less than the 5-10 per cent predicted due to timely rainfall and warmer conditions, according to Dairy Australia.
Fonterra told its New Zealand dairy farmers last week to expect $NZ 4.25kg/MS for milk next season, which begins today.
Dairy Australia analyst John Droppert said the figure remained below the $NZ5.30kg/MS cost of production so would not promote milk growth. “If the average farmer lost $NZ200,000 this year and $50,000-100,000 last year, their equity position could be stretched even if it is stretched considerably less this year.”
US milk production is tracking at similar levels to last year, with the United States Department of Agriculture predicting a 1.5 per cent increase in milk production his season to 96 billion litres.
“In reality it is good for US farmers at the moment, milk price is falling but they have cheap corn as well. The margins haven’t really contracted, costs have fallen at the same levels as income,” Mr Droppert said.
US butter imports have grown but at the same time USDA has forecast growth in national milk production, Mr Droppert said. He said the US was not depressing the global market as it was importing more butter, but the “flip side” was skim milk powder exports.
“They are tracking along and are a bit of a threat to the powder market,” he said.
EU milk production finished the 2105 calendar year up 5 per cent, compared to 2014, representing an additional 3.2 billion litres of production, according to Dairy Australia. January production was up 5 per cent, but Dairy Australia said production was varied for more recent months with some increases and some indications production is starting to slow.
The European Commission has announced support measures for farmers, including a doubling of the ceiling for intervention purchases of SMP and butter. The initial 109,000 tonnes of intervention for SMP was filled and now the EU Commission has opened another 109,000 tonnes. Dairy Australia said this supports the US$1900 a tonne, floor price for SMP.
Argentinian milk production finished the year up 1.6 per cent compared to 2014.
