Thursday, 04 April 2019 08:26

Strong demand, low supply lifts prices

Written by Sudesh Kissun

font size decrease font size increase font size

Milk prices are lifting on lower world supply and continued strong demand.

Strong global demand for dairy and constrained milk supply will keep farmgate prices high, say New Zealand’s large milk processors.

Demand for dairy products remains high in Asia, including China; milk supply in some large producing regions remains under pressure due to weather issues.

NZ’s second-largest processor Open Country Dairy notes that with milk volumes in NZ dropping fast and global supply tightening, prices have recovered over the last seven consecutive GDT auctions.

In its monthly newsletter to farmer suppliers, OCD chief executive Steve Koekemoer says when the first signs for a hot and dry summer in NZ became visible the company took a conservative approach and slowed sales.

“This allowed us to take advantage of the increasing prices over the last couple of months and led to an exceptionally good result for our January settlement period.

“Our assumption is that the supply/demand dynamics will support higher prices medium term which could bring more upside for the remainder of 2019.”

The company settled its January period milk price (for milk supplied in December and January) for 2019 at $6.49/kgMS.

Fonterra is forecasting a farmgate milk price of $6.30-$6.60/kgMS, saying it reflects strong global demand relative to supply.

Chief executive Miles Hurrell told a recent media briefing that good demand for ingredients was coming from Asia, including Greater China.

On the supply front, milk growth has slowed due to trying weather in some large milk producing regions.

Australia’s milk production is forecast to be down 7-9% on last season due to drought; in the EU, growth has slowed and is forecast to be less than 1% on last year.

Hurrell says for Fonterra farmers the strong dry weather has also impacted milk production.

The co-op two weeks ago downgraded its milk forecast for the season from 1530 million kgMS to 1510 million kgMS for 2018-19. This is slightly above last season’s collections of 1505 million kgMS, a season also impacted by poor onfarm conditions.

More like this

What Would Synlait Be Worth to Fonterra or a2 Milk?

Speculation of a possible joint move by Fonterra and a2 Milk to buy Synlait raises a much bigger strategic question, says agribusiness expert Dr Nic Lees.

Why 'Fork to Farm' Beats Farm to Fork, Expert Says

In the past, much has been made of the concept of farm to fork, but an Australian expert in food science and marketing with experience in the dairy industry, Dr Angeline Achariya, says the reverse of this slogan is critical to win modern day consumers.

Four-Year Trial Confirms Plantain Cuts N Losses 33%

A four year trial has reaffirmed that mixing plantain into dairy pastures can help reduce nitrogen losses to freshwater while maintaining milk production and profitability, say researchers.

Fonterra Opens Upgraded Chengdu Application Centre

Fonterra has opened its upgraded Chengdu Application Centre, bringing New Zealand dairy expertise closer to customers in one of China's fastest-growing regions.

Stephen Allen to Step Down as Tatua Chair After 23 Years

Tatua chair Stephen Allen says he leaves the co-op with a deep sense of gratitude for the people who have contributed to its success.

Featured

Editorial: Drones Are Not Toys

OPINION: David Seymour and James Meager's plan to make it easier for farmers and orchardists to operate drones can best be described a 'courageous' move.

Lanaco and Blueair Launch World-First NZ Wool Air Filter

New Zealand wool is reaching new heights as air filtration companies move away from synthetic products to biodegradable alternatives.

Opuha Dam Commissions New Valve in Major Flood Safety Upgrade

Opuha Dam's ability to protect South Canterbury communities from major flooding has taken a significant step forward, with Opuha Water Limited (OWL) successfully commissioning a new outlet valve capable of releasing record volumes of water from the dam ahead of a weather event.

Freshwater Farm Plan Changes Welcomed by Primary Sector

There's been widespread support from the primary sector for the Government's announcement on changes to freshwater farm plans that come under the Natural Environment Bill, which is now set to replace the existing RMA.

Pāmu and Meet the Need Launch Mince Recipe Cards for Food Banks

A partnership between state-owned enterprise Pāmu (Landcorp Farming Limited) and charity Meet the Need is putting more than quality New Zealand beef into food bank parcels this year.

Daniel Eb Defends Opportunity's Approach to Rural NZ

The Opportunity Party has faced criticism during the election campaign that its policies are too urban-focused and offer little for rural communities.