NZ remains lowest-cost milk producer - report
The cost of producing milk in New Zealand continues to compare favourably with other exporting regions despite a lift in production costs over the past five years.
The report says milk production across the export regions is revving up, and the pace will accelerate in the coming months.
To counter this, rejuvenated import-purchasing from Chinese buyers should prevent the market from being overwhelmed in coming months.
“We are again seeing the export engine produce more milk with higher farmgate milk prices in most export regions the catalyst for a supply-side response,” says Rabobank dairy analyst Emma Higgins.
Based on global commodity price expectations across the remainder of the 2017-18 season, Rabobank forecasts a full- year farmgate milk price of $6.50/kgMS.
Higgins says while the Oceania spring peak looms large, and Australia and New Zealand still remain on-track to increase production, China is expected to absorb much of this increase as an active buyer – at least in the short-term.
“Chinese milk supply has failed to keep up with demand, meaning that Chinese buyers have been increasingly active in recent months,” she says, “and this is a trend that is expected to continue into 2018 – albeit, at a lower rate.”
Higgins says the outlook for commodity markets is for a balanced market to continue in the remainder of 2017.
“We’re not expecting to see much downside pressure on global dairy prices until early 2018, when the Northern Hemisphere ramps up their milk supply.”
NZ dairy export volumes for the three months to July 2017 were 5% higher compared to the prior year. This was a result of milk flows being three per cent higher over the same period and being supported by a return to the market of key buyers in export markets.
On-farm seasonal conditions at present are challenging for most parts of the country and this shows in August 2017 production which is 1.6% down on last year.
