Inside Milk
Excess in milk starts to dry up
On Tuesday 28 August it is possible to bid again for skimmed milk powder from European intervention. Will this lead to a further contraction of inventories? Positive developments can also be seen in the United States (US). And how will the start of the season in New Zealand turn out?
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The European Union (EU) and the US are slowly approaching the lowest point in milk supplies. In both regions the sector has been significantly challenged by a long period of dry weather. The damage to the milk supply is probably greatest in the US, because high humidity further limits milk production per cow.
Shrinking inventories
The milk powder trade in the US has baat with slightly less milk and good demand. This is also supported by the start of the school year, which drives consumption. Butter stocks also decreased in volume; There was a more limited availability of milk fat, but a greater demand from ice cream makers. It should be noted that the stock is still 3,5% larger than in 2017. There is also 3,3% more product in the cheese stores than last year.
A further decline in milk production is expected in the coming period. For example, August 11 resulted in the highest slaughter figure in a number of years (60.948 slaughters). However, this is still just a drop in the ocean. The higher slaughters coincide with record low prices for heifers.
Stock up or not?
The US is nearing the point where dairy farmers are deciding whether to stockpile feed and continue or exit the industry. Years of disappointing milk prices are increasingly resulting in dairy farmers choosing to... to stop. The Americans are counting on the market finally returning to balance, which may result in a remunerative milk price again.
There is no such concern in New Zealand. There people are eagerly awaiting the start of the new season. Grass growth in particular is decisive. The forecasts are good and the relatively high milk price is clearly an incentive. As a result, buyers are waiting and seeing what's next.
Position of the EU
Developments in the US and New Zealand are completely different. The EU is exactly in between. The drought has had an impact on the sector, but there were only real downsides in milk production in August. However, this can sometimes work out well for the sale of milk powder intervention.