The dairy market will remain in balance in the last quarter of 2017. This is because supply and demand will be in equilibrium. It is possible that the milk price will fall in the first quarter of 2018, because more milking will take place in Oceania and Europe. That is what Rabobank writes in the 'Third quarterly report on dairy 2017', which was published on Thursday.
Worldwide there will be more milking in the coming months, but on the other hand Southeast Asia and China will import more dairy products. Chinese milk production is lagging behind this year and tight stocks are shrinking rapidly.
At the same time, the consumption of dairy products is growing. Rabobank predicts Chinese import growth of 35% in the second half of 2017, compared to the same period in 2016.
Price drop in 2018
The extra milk production in Oceania is expected to give slight price pressure, but that is not enough to unbalance the dairy market over the next 3 months.
However, the bank warns that the increase in production in the first quarter of 2018 could lead to a fall in prices. Chinese milk production and consumption will be more harmonized in 2018, so that the country will need to import less dairy.
Dutch farmer hardly milks less
In the Netherlands, milk production in the first 8 months of 2017 is about 0,4% lower than in the same period last year. This is the result of the LU reduction scheme, part of the phosphate reduction plan 2017. The decrease was estimated to be larger, but because the milk prices are quite good, the Dutch dairy farmers did not produce much more milk this year.
The Dutch milk price in July and August was 50% higher than in the summer months of 2016. Rabobank predicts a production level of approximately 14 billion kilos of milk in 2017. Production in 2018 may be more stable and will not exceed the level of 2017.
European milk production is increasing
However, milk production in Ireland (+7,6%), Poland (+4,6%) and Italy (+3,3%) did increase. The 2 largest milk producing countries, Germany (-2,4%) and France (-2,2%), are milking less in the first 7 months of this year than 1 year ago in the same period.
As a result of the good milk prices, Rabobank expects milk production in Europe to continue to grow. In the third quarter of 2017, 1,3% more was milked. The bank expects growth of 2,2% in the fourth quarter and 2018% in the first quarter of 1,6.
European cheese processors more
European dairy processors have made more cheese this year. This is an increase of 1% in the first 7 months of 2017, compared to the same period in 2016. The reason for this is the good prices for cheese and whey.
The production of butter has decreased by 5,2% this year and the production of skimmed milk powder decreased by 9,3%.
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