Bakers prefer butter, helping prices soar
Consumers around the world are willing to pay more for products containing dairy and this is driving demand for butter and cream, says Fonterra.
Could Fonterra have predicted the current downturn in dairy prices?
That’s the question the co-op board is looking into, doing more analysis of international markets to determine whether the downturn could have been forecast correctly, says chairman John Wilson.
He told Rural News that during the last 12 months the co-op found it “increasingly difficult” to forecast prices.
Other dairy companies around the world faced a similar problem. “I was in Europe recently and their two major cooperatives -- Arla and FrieslandCampina -- said they also have struggled to forecast.”
He says “unexpected significant events” also impaired their ability to forecast correctly.
Milk production in Europe boomed as prices rose; Russia’s ban on European and Australian dairy products caused the global market to flood with milk; and supply/demand analysis in China was affected by inability to get accurate data.
Wilson says Fonterra is keen to find out if the current downturn could have been correctly forecast.
Meanwhile Wilson says the growth in global milk production is slowing as low returns force farmers to milk fewer cows.
Growth in Europe for the year ending July 2015 was less than 1%. DairyNZ expects New Zealand milk production to be down 2% this season.
In the US, milk production varies between the West Coast and Mid-West regions; milk production across the US is expected to grow 1.5-2% but the domestic demand is growing.
Wilson says the drop in production is pleasing in respect of commodity pricing. He expects less milk to help lift prices but cautions that the next six months will be crucial.
“A lot depends on weather conditions and how much milk is produced around the world,” he says.
Farmers worldwide are struggling to sell milk below the cost of production.
NZ farmers are looking at their farm systems -- looking to maximise pasture usage and buying less supplement.
While the global market is awash with milk, demand is varied across the markets, says Wilson. Demand in Middle East and Africa is significantly up while South American demand is down due to economic weakness.
In China, the world’s biggest market for dairy products, demand is soft as the country works through large inventories. “There has also been strong milk production in China in 2014.”
OPINION: Farmers are rightly urging the Government to relax the rules around KiwiSaver and allow young farmers to use their savings towards purchasing either a house, cows or a farm.
Winning the 2025 New Zealand Share Farmers of the Year still hasn't sunk in for Thomas and Fiona Langford.
The grass may be growing again in the drought-stricken coastal area of Taranaki, but the outlook for many farmers there is far from rosy.
Doctors and rural women are welcoming the recent pre-budget announcement from the Government that it would be boosting funding to urgent and afterhours care facilities.
Over 300 farmers and rural professionals have gathered in Hamilton for the first DairyNZ Farmers Forum for this year.
Winter grazing is looming again and the Ministry for Primary Industries says it's going to increase proactive farm visits and provide practical advice for farmers in the lead up to the season.
OPINION: Imagine if the Hound had called the Minister of Finance the 'c-word' and accused her of "girl math".
OPINION: It's good news that Finance Minister Nicola Willis has slashed $1.1 billion from new spending, citing "a seismic global…