Tuesday, 29 March 2016 07:55

EU milk seen to be slowing – Wilson

Written by  Sudesh Kissun
Fonterra chief executive Theo Spierings makes a point to journalists while chairman John Wilson looks on. Fonterra chief executive Theo Spierings makes a point to journalists while chairman John Wilson looks on.

Fonterra chairman John Wilson says he is absolutely confident dairying will recover back to sustainable pricing levels for farmers.

However, he says the recovery is taking longer than everyone anticipated.

The key factor remains the extra milk coming out of Europe. But Wilson told Dairy News that there are signs Europe's milk growth is slowing. Fonterra has been talking to European dairy co-ops and agri analysts, Wilson says.

Over the last two years milk production has ramped up in the EU, backed by higher prices and new investment on farms.

According to Fonterra's latest global update, production in the EU in December increased 5% over the same month the previous year.

The EU has seen growth in milk production in each of the nine months following the removal of quotas on April 1, 2015. Production for the 12 months to December increased 2% compared to the same period the previous year, or an increase of 3.2 billion litres. Over this period Ireland was up 13%, Netherlands 7%, Poland 3% and the UK 2%.

The EU is also pumping most of the extra milk into export markets. EU exports increased 10% in November compared to the same month the previous year. Increases were seen in most of the major dairy categories with only SMP decreasing over the month. Exports have increased 7% for the 12 months to November, largely as a result of fluid and fresh dairy up 15%, whey powder and SMP up 9%, and infant formula up 7%.

But now it is becoming uneconomical for farmers in some regions. Some EU countries are introducing caps on stocking rates to minimise damage to the environment.

Wilson says Fonterra now supports analysts' view that Europe's milk production growth will slow to 1.5% compared to global demand rising by 2-3%. Demand for more milk will come from China, Asia and Africa.

"Once we reach a position where demand is greater than supply, prices will improve," Wilson says.

However, he is unable to suggest a timeframe. "We are still confident prices will rise but picking the exact time period is hard."

Wilson says other factors, such as US milk production and geo-political events, are also impacting milk prices.

According to Fonterra's global update, US production in January was in line with the same month last year. While the rate of milk production growth has continued to slow, for the 12 months to January it remains up 1% on the same period last year.

But most US milk is used in the burgeoning local market.

More like this

Winston Peters questions Fonterra divestment plan

Foreign Affairs Minister Winston Peters has joined the debate around the proposed sale of Fonterra’s consumer and related businesses, demanding answers from the co-operative around its milk supply deal with the buyer, Lactalis.

Editorial: A new era for two co-ops

OPINION: Farmer shareholders of two of New Zealand's largest co-operatives have an important decision to make this month and what they decide could change the landscape of the dairy and meat sectors in New Zealand.

Should co-op sell its consumer brands?

OPINION: As CEO of the Dairy Board in the 1980s I was fortunate to work with a team of experienced and capable executives who made most of the brand investments that created the international consumer business Fonterra inherited. Soprole in Chile was the largest, but there were more than 20 countries where consumer marketing companies were established and Anchor and other brands were successfully launched.

Featured

'One more push' to eliminate FE

Beef + Lamb New Zealand (B+LNZ) is calling on farmers from all regions to take part in the final season of the Sheep Poo Study aiming to build a clearer picture of how facial eczema (FE) affects farms across New Zealand.

Winston Peters questions Fonterra divestment plan

Foreign Affairs Minister Winston Peters has joined the debate around the proposed sale of Fonterra’s consumer and related businesses, demanding answers from the co-operative around its milk supply deal with the buyer, Lactalis.

National

Machinery & Products

New McHale terra drive axle option

Well-known for its Fusion baler wrapper combination, Irish manufacturer McHale has launched an interesting option at the recent Irish Ploughing…

Amazone unveils flagship spreader

With the price of fertiliser still significantly higher than 2024, there is an increased onus on ensuring its spread accurately at…

» Latest Print Issues Online

Milking It

Tough times

OPINION: Dairy industry players are also falling by the wayside as the economic downturn bites around the country.

MSA triumph

OPINION: Methane Science Accord, a farmer-led organisation advocating for zero tax on ruminant methane, will be quietly celebrating its first…

» Connect with Dairy News

» eNewsletter

Subscribe to our weekly newsletter