Despite a big production drop in South America and declining farm output in many other regions, global dairy commodity stockpiles are currently about 6.4 million tonnes above their historic “normal” levels and set to peak at 8.5m tonnes next year.
Much of that surplus is in Europe where milk production grew almost four per cent in the year to April and EU stocks are now at peaks last seen in 2009, before production quotas were abolished.
European milk production may even accelerate if Britain’s exit from the European Union (EU) weakens the euro’s value and makes exports more competitive, say researchers with agri banker, Rabobank.
Rabobank’s latest assessment of the global dairy glut does not expect much relief from depressed prices for Australian farmers until late 2016-17.
Australian milk production fell 2.7pc in the year to April in response to depressed world markets and last summer’s dry southern seasonal conditions.
While sharp declines in global production surpluses were likely to emerge by early next year, Rabo’s report said worldwide demand for dairy goods was likely to be generally weak for another year.
Low oil prices were a key factor according to senior dairy analyst, Michael Harvey, who noted energy resource-based economies in the Middle East and North Africa had less appetite for dairy imports at present.
Energy-rich Russia was also extending its significant import ban on products from Europe, the US and Australia until late 2017, while Chinese demand was growing more slowly than expected.
Chinese consumption had been tipped to grow at 2.5pc in 2016, but Rabobank revised its forecast to about 1.5pc, moving up to 2pc next year.
“While we still forecast prices to rise modestly in 2017, rises will be dampened by continuing weak demand due to low oil prices, trade bans and lack of affordability in emerging markets,” the report said.
Much of that surplus is in Europe where milk production grew almost four per cent in the year to April and EU stocks are now at peaks last seen in 2009, before production quotas were abolished.
European milk production may even accelerate if Britain’s exit from the European Union (EU) weakens the euro’s value and makes exports more competitive, say researchers with agri banker, Rabobank.
Rabobank’s latest assessment of the global dairy glut does not expect much relief from depressed prices for Australian farmers until late 2016-17.
Australian milk production fell 2.7pc in the year to April in response to depressed world markets and last summer’s dry southern seasonal conditions.
While sharp declines in global production surpluses were likely to emerge by early next year, Rabo’s report said worldwide demand for dairy goods was likely to be generally weak for another year.
Low oil prices were a key factor according to senior dairy analyst, Michael Harvey, who noted energy resource-based economies in the Middle East and North Africa had less appetite for dairy imports at present.
Energy-rich Russia was also extending its significant import ban on products from Europe, the US and Australia until late 2017, while Chinese demand was growing more slowly than expected.
Chinese consumption had been tipped to grow at 2.5pc in 2016, but Rabobank revised its forecast to about 1.5pc, moving up to 2pc next year.
“While we still forecast prices to rise modestly in 2017, rises will be dampened by continuing weak demand due to low oil prices, trade bans and lack of affordability in emerging markets,” the report said.