The country's second-largest milk processor says it isn’t surprised at the big drop in whole milk powder prices at the last Global Dairy Trade (GDT) auction.
In the May issue of its TalkMilk supplier newsletter, Open Country Dairy chief executive Steve Koekemoer warns farmers that with the increased global supply of milk, “...we could be entering a rough few months if overall demand does not recover fast.”
Koekemoer says milk volumes continue to increase in the US, EU and even Australia, although from a lower base.
“NZ supply towards the end of the season is also trending higher than anticipated – indicating no real global slowdown,” he adds.
“Ireland is processing almost at full capacity with apparently only around 2% of processing capacity available across the country – but is managing to get all the milk processed.”
Koekemoer also warns that with NZ having more cows available – due to lower culling from meat work restrictions and feed surplus – will only mean more milk. “Although the WMP pricing outlook seems more positive than other commodities – due to our seasonal supply reduction, the downward pressure on prices is still evident based on market sentiment,” he adds. “The next GDT event will be key to providing us with an indication for the start of the new season.”
Koekemoer says for those suppliers who prefer securing a milk price for a portion of their milk next season, OCD has just released another Fixed Milk Price offer for 2020/21.
“We continue to look for pricing options that remove some future volatility, and our sales team have done a great job securing some more volume with key customers who share this sentiment.”
Koekemoer says milk quality from NZ’s predominantly pasture based system has always been a strong marketing proposition and one that customers understand.
“This is particularly important in a very competitive environment like we currently find ourselves in. We continue to push these benefits to attract market premiums over other sources, although now at a lower base.”
He says the company product mix is also helping ease any impact of falling milk prices.
“OCD has continued to move away from manufacturing standard whole milk powders and changed its powder products basket to include around 75% of powders with either premium functional performance or much tighter microbiological parameters than competitor’s products,” Koekemoer explains.
“This strategy has ensured that we are seen as a premium supplier, which during these tough times attracts demand and puts us in a strong position.”