Strong production, tested demand send milk prices crashing
Strong global milk production and rebalancing of demand among key buyers has delivered one of the biggest drops in whole milk powder prices in recent years.
The recovery is a question of when not if, Moynihan told Rural News.
“The timing of the recovery will depend on how much of that price improvement is seen in the 2015-16 season and how much is seen in the following season,” she said. “Rabobank still expects it will be largely a 2016 recovery therefore a dramatic lift in this season’s milk price is unlikely but recovery should be seen in 2016-17.”
Moynihan says production lifts are still being seen in Europe, the United States and the tail end of the New Zealand season was much stronger than initially expected. “The rate of increase is starting to slow slightly but it is still increasing.” This is contributing to the delay in price recovery.
The European Union is boosting production after the lift on quotas, as predicted. Those countries which geared up for the removal of quota have seen strong increases in production but lower prices are curtailing their enthusiasm.
“So production is growing but not as strongly as it could be if we were in a higher milk price environment.”
Synlait announced its forecast milk price for the forthcoming 2015-2016 dairy season at $5.50 kgMS.
“Despite the small recovery in commodity prices we saw earlier this year, the market has not delivered the stability we had hoped for,” said John Penno, Synlait managing director.
“We’re very aware of how financially tough this current season is for our suppliers. We are confident commodity prices will recover over time and our 2015-2016 forecast milk price assumes we will see the beginning of this recovery from the current low prices.”
“The global oversupply is being met by soft demand across the board. This creates a lot of uncertainty in an already volatile market, so it will remain a fragile environment for the immediate future.”
