Weak supply keeping prices high
Weaker milk production in the Northern Hemisphere is keeping dairy prices high.
Rabobank dairy analyst Emma Higgins says supply is short, thanks to strong demand from consumers riding the trend to dairy fat.
“This started when the European milk pool slowed towards the end of 2016 so there was less milk to churn into butter,” she told Dairy News.
“At the same time demand was bubbling away, so now we have high demand for fat and low available supply. That’s why prices have been skyrocketing.
“European milk production has now come back on line but it will take some time to correct the structural change and the record change between butter and skim milk powder, or fat and protein.”
ASB senior rural economist Nathan Penny says while butter prices will eventually fall, generally higher butter or milk fat prices are here to stay.
“Demand has fundamentally shifted higher as consumers now accept that butter is no longer bad for you.
“This is good news for dairy producers globally, NZ included. In particular Fonterra is now spoilt for choice. Its recent added production flexibility means it can more easily optimise its production mix.
