Dairy markets: stable or stagnant?
At the 19th September meeting of the EU Milk Market Observatory Economic Board, where I was representing COPA, this question was asked. With supply and demand in reasonable balance, why are farmer milk prices stagnant (in fact, falling in Ireland!)?
We have been repeating it for months: milk output growth among the most important dairy regions has been very modest. Low private powder stocks and empty intervention, though butter stocks have been higher, have only contributed in a limited way to available supplies.
Combined with reasonably solid demand from the likes of China and other Asian countries as well as within the US and the EU, we definitely have a balanced dairy market.
Low milk supply growth – except for New Zealand’s very early season
January to July output for the main 4 milk production region remains in negative territory, at just under 0%. January to June production fell 0.5%, with particularly negative trends in Oceania and South America. Expectations from the EU Commission’s analysis suggests that production will grow very moderately for the second half of 2019.
For the two trough months of June and July, New Zealand production has increased substantially, by 14% in June (absolute trough) and just under 5% for July, while August output went up by 2.22% (milk solids – actual volume was only up 0.8%). Rabobank predicts a full 2019/20 season output for New Zealand between -1% and +1%, depending on spring weather patterns over the next number of weeks coming to the October peak.