Milk production under increasing pressure

The prices of the various dairy commodities traded on the Global Dairy Trade (GDT), have shown a fairly stable picture in the second quarter. This is what Susan Kilsby, analyst at the NZX, outlines. When she looks ahead to the third quarter, she expects a slight decline.

Little sales pressure
New Zealand and Australia are currently at their lowest point in the season. It means that inventories are low and there is no pressure to sell. When the season 'really' starts, this will change. At the same time begins milk production decreasing in size in the Northern Hemisphere.

In various places in the European Union (EU) and the United States (US), milk production is additionally inhibited by the summer conditions. It decimates the positives that were established 1 year earlier.

In addition to the heat and drought, supply is also hampered by lower milk prices and a lack of dairy cows. Although milk prices are generally low at the peak of milk supply, they are now below last year's levels.

The danger of lower prices is decreasing
"The slowdown in the growth of the milk pool should support the prices of the various dairy commodities, but this has yet to prove itself. Over the last month, the prices have shown a decline, which means that some of the previous gains have disappeared. Now the growth of the milk pee decreases, the risk increases lower prices also off."

There is discussion in New Zealand about the price for the 2018/2019 season. Processors have started with a forecast of $7 per kilo of milk solid (converted €29,72, at 4% fat and 3,3% protein). This is a relatively high price, which means there is a high risk of price reductions. According to the NZX, this results in dairy farmers hedging at prices just below this level. The AgriGQ milk price forecast is $6,68 per kilo of milk solid (converted €28,37, at 4% fat and 3,3% protein).

1 NZ dollar = €0,5818The quotation for whole milk powder is around average.