Dairy Quarterly Q1 2018: Turn the Pressure Down
- By: "Farm Tender" News
- Regenerative Ag & Carbon Farming News
- Apr 04, 2018
- 535 views
- Share
A robust import programme by Chinese buyers, combined with a weather-impacted shoulder to the New Zealand season, were the perfect ingredients for the short-term rally in Q1 2018.
In the background, the export engine is firing on most other cylinders, as production growth expanded across all other regions in Q1 2018.
However, weather risks have now been extended beyond New Zealand. Europe battled the ‘Beast from the East’, Australia had localised bushfires, and there are drought conditions at play in Argentina.
The peak period of milk production in the Northern Hemisphere still looms as a pressure point for the global market in Q2 2018.
The European Commission does not intend to purchase any skim milk powder (SMP) at the fixed intervention price in 2018, instead focusing on clearing the 375,700 tonnes of intervention SMP stocks, which will continue to pressure SMP prices and likely divert milk to other product streams.
Farmgate milk prices continue to weaken in Q1 2018 (albeit from a high base), and more downward pressure is expected. Meanwhile, the risk of higher feed prices is emerging.
In summary, previous expectations for the extent of pressure on global markets to come in Q2 2018 have moderated, with a global rebalance delayed until 2H 2018.
Regional dairy markets
EU
As anticipated, supply growth is moderating across Europe ahead of the peak. A cold weather front has been a recent challenge, but is normalising.
US
High stocks, sluggish fluid milk sales, and milk supply growth above expectations have exerted pressure on wholesale prices. Milk supply growth will moderate.
New Zealand
A very challenging summer, leading to reduced milk volumes, has been a key ingredient for a short-term rally and firmer whole milk powder prices.
China
Chinese buyers have some short-term cover, but their appetite through 2018 is set to deliver a double-digit increase in import volumes vs. 2018.
South America
A nascent economic recovery across South America should provide the impetus for further dairy demand growth in 2018.
Australia
Dairy farmer confidence levels take a sizeable hit as milk price uncertainty clouds the outlook into the 2018/19 season.
Share Ag News Via