Global milk flows fall, underpinning price recovery
We have already documented the fact that the EU production trends, especially in May and June, were either for slowing growth (Netherlands, Poland, Denmark) or for out and out reductions (France, Germany, UK, Spain) – see more details on this below.
But we now see that most of our international competitors are also pulling back, in some cases quite dramatically.
According to NZ Farmers, Kiwi June milk supplies were down 10%. May output had increased by 3.5%, finishing the 15/16 season on a stronger note, though the whole year closed 1.6% down on the previous season. Whatever factors allowed for strong growth in May were well and truly gone in June, the first month of the new season. Supplies in the South Island fell by a massive 22%, with the North Island output declining 6%. The forecast for the full year 16/17 output remains at -3%.
Another positive supply-side piece of news from New Zealand is that Fonterra is reporting that their stocks are down 11% on the same period last year.
In the US, latest USDA/WASDE forecast for 2016 is that production will increase by a total of 1.8 % – revised downwards from 1.9% a month earlier.
According to Quarterra Consulting and Advisory, a Buenos Aires based consultancy firm, In South America, poor weather and low milk prices have also led to major production decreases. Argentina and Uruguay experienced torrential rain in April, causing infrastructural failure so that milk tankers could not reach farms and collect milk in some cases. This was compounded by unseasonally low temperatures.
In Argentina, Jan-May milk production was down 11.9%, it was down 12.5% in Uruguay for the same period, while Brazilian output was down 4.5% for the Jan-Mar period. All three countries are relatively significant milk producers and exporters. Due to poor economic conditions in Brazil, a big customer for its neighbour’s dairy products, payment defaults have been reported.
EU supplies easing in recent weeks, even without EU production control measures
Poor prices over a longer period than was ever sustainable, a cool spring, and major increases in cow culls, all combined to see a dramatic change of trend in EU supplies over the last couple of months especially.
In some EU member states, production is falling:
– In France, for the period from April to June 19th, output was down 1.62%. For the month of April itself, it was –1.1%, with the fall speeding up for May to –3.2%, and again for the week ending June 19th to -3.27%
– In Spain, production for the year to end May was down 3.7%, with May itself –1.3%
– Supplies in the UK are practically collapsing: while the year to the end of May was 1.2% easier, the month of May itself was down 7.8%, while the 2 weeks ending 02/07 were down a whopping 9.2%
– Germany, for the week ended 26th June, was down 1.9%, a steepening rate of decrease over the last number of weeks (see graph below for German weekly milk deliveries for the year to 26th June).