Wednesday, 02 October 2019 08:55

Global markets firm, NZ flying

Written by  Staff Reporters
Emma Higgins, Rabobank. Emma Higgins, Rabobank.

The global dairy market looks set to remain firm through the coming six months, says Rabobank’s latest global Dairy Quarterly report.

The New Zealand season had “got off to a flying start,” says Rabobank dairy analyst Emma Higgins.

Rabobank is maintaining its farmgate milk price forecast at $7.15/kgMS.

Globally the outlook for demand growth is more than enough to absorb the modest volumes of increasing milk flows, the report says.

Despite higher farmgate milk prices, “dairy farmers in most export regions have struggled to convert improved market conditions to production growth”.

Production across the Big 7 exporters (US, EU, NZ, Australia, Brazil, Argentina and Uruguay) is expected to increase by just 0.4% in Q4 2019 and 0.8% in early 2020.

Several constraints have prevented supply growth, says the report. A warm summer in China and northern Europe is partially to blame. 

But it is constraints in respective regional markets that have limited -- and will continue to limit -- farm-level expansions and keep the broader market firm.

The report cites rising costs of production, lower confidence, capacity restrictions and environmental regulations.

For NZ, the report says, the 2019-20 season is shaping up to provide another healthy spring flush and first half production.

Higgins says with calving almost complete across NZ, meaningful production volumes will start to appear as the weeks progress.

“A mild winter made for near perfect conditions on farm in many dairying regions in the lead up to the spring peak. 

“Pasture covers range from good to strong across the country, leading to ample feed reserves and early silage cutting in parts of the North Island,” Higgins said. “And these conditions have helped keep a lid on feed costs.”

She says possible bad weather forecast by NIWA over September and early October had so far failed to eventuate, leading the bank to expect NZ milk production could grow up to 1% to May 31, 2020. 

“This is our expectation if key dairying regions miss volatile spring weather,” she said.

Higgins says based on global commodity prices across the remainder of the 2019-20 season, Rabobank is maintaining its farmgate milk price forecast at $7.15/kgMS.

However, she cautions, “some downside risk” is posed by emerging economic headwinds.

On the demand side, the Dairy Quarterly says, is a noticeable slowing of global economic activity, consumer confidence is waning and trade tensions remain a logistical headache for dairy exporters.

China posted its weakest year-on-year GDP growth in 30 years through Q2 2019 (vs 2018) and Southeast Asian markets have been impacted, the report says.

Meanwhile, similar challenges face the EU, as Germany saw its economy contract in Q2 versus last year, and a possible challenging end to Brexit. 

And the US has also shown concerning data, with the 2-10 year yield curve finally inverting, fuelling speculation of an impending recession.

While in NZ, Higgins says, dairy producers are also facing the challenge posed by proposed new regulations for freshwater recently announced by the Government. 

“While much of the longer term detail and potential cost of the regulation is unclear, the near term certainty is a cost imposed on farmers from 2020 as part of the aim of the regulations to improve on farm practices such as winter grazing, stock exclusion and reduced nitrogen losses.”

More like this

Prices expected to wax and wane

Expect more of the same as dairy prices on Global Dairy Trade (GDT) broke a two-month drought and posted an increase last week.

Global movers and shakers

Dairy companies around the world are facing a dilemma – whether to expand or divest assets, says Rabobank’s Mary Ledman.


Longest running ag field days all go

The South Island Agricultural Field Days, held in Kirwee on the outskirts of Christchurch, will celebrate its 70th year in March 2021 with a bigger demonstration area.


New Feds man keen to build

New Feds board member, William Beetham wants the organisation recognised for its significant contributions to NZ farming and society as a whole.


Global movers and shakers

Dairy companies around the world are facing a dilemma – whether to expand or divest assets, says Rabobank’s Mary Ledman.

Live cattle exports in limbo

The fate of 28,000 cows in quarantine in New Zealand and supposedly destined for China in the coming weeks hangs…

Machinery & Products

Mowers get a makeover

Well known throughout New Zealand over the past 18 years, Pottinger has redesigned its rear-mounted Novadisc mowers to incorporate a…

Hardy spotlight

High quality, reliable lighting is essential for anyone involved in agriculture or the great outdoors.

Simmm twin water blasters

Italian made Simmm Power Cleaner 100/11 and Power Gun 100/11 single-phase (230 volt) electric water blasters are proving popular in…

OPD argument raging on

A stoush is brewing with the Federal Chamber of Automotive Industries (FCAI) heavily criticising Farmsafe Australia’s recent Safer Farm Report.

» Latest Print Issues Online

Milking It

Cows and earthquakes

OPINION: It has long been suggested that animals have senses that humans don’t, and often behave differently than usual shortly…

Battle is on

OPINION: One of Australia’s biggest dairy businesses is back on the market after the Federal Government knocked back a bid…

» Connect with Dairy News

» eNewsletter

Subscribe to our weekly newsletter