Speaking to about 30 farmers during a visit to South Taranaki this week, Christchurch-based Hayley Moynihan predicted a sustained recovery in global milk prices, but not until the end of the year.
She thinks the price for wholemilk powder will exceed US$3500 a tonne because consumer tolerance of high prices is lifting. «The markets can cope with US$4000 a tonne.
«Pricing will improve in the medium-term, but it’ll be a long haul to get there.»
She thought prices might fall before they increased in June and again in September.
Although Global Dairy Trade prices lifted faster and further than expected in February, farmers should realise they weren’t out of the woods yet and that was realised when prices dropped back again this week.
Globally, plenty of product would be available in the next six months, although stockpiles or accumulated inventories were unlikely.
Challenges in the next six months included the effect on European milk production of the European Union’s removal of quotas on April 1 and the amount of production in the United States in an era of low grain prices.
The end of quotas meant European milk production was influencing world markets more than the US. Milk production declined in Europe at the end of 2014 after a rise as farmers sought to avoid exceeding their quotas – and subsequent penalties.
«So we’ve taken some of the pain [caused by the end of quotas] already. We took a volatility hit earlier than expected because the milk came on earlier.»
Moynihan said all eyes were on China, where the growth of domestic consumption had slowed as cities matured. «The next wave of growth will be tougher because income levels will not grow at the same rate.»
Imports of dairy products into China had fallen 50 per cent on exceptionally strong demand last year. Annual consumption in China was 45 billion litres, of which 80 per cent was produced domestically. The question was whether China would promote domestic milk production or whether it continue to rely on imported product.
As the world’s biggest importer of milk, at between 10 and 15 billion litres, China had a huge impact on the world market.
Demand in the other markets of South-East Asia, particularly Indonesia, North Africa and the Middle East, had risen because those regions were unable to lift their self-sufficiency. «But all exporters are looking at those markets, so we will hit competition.» Economic growth in the world’s emerging markets was slowing, but could get a kick-start from low oil price, she said.
Source: Stuff