Forecast of a lower milk production in New Zealand: what expectations on commodity prices? [News Oceania n°21/2015]

Period: October 5 – 30, 2015

This report covers a whole month, instead of the last 15 days as usual.

AUSTRALIA

• Milk production: in September 2015 was up 0.8% from September 2014, and Milk production is expected to increase in 2016 as weather conditions continue to improve.
• Weather situation: dry conditions were across most states in the first half of October, but weather continues to improve.
• Milk Producers: are expected to keep herds at current levels. Quite a few acres of cereal crops are already being mown for hay in grain growing areas, as croppers have assessed that there is insufficient moisture to take them through to the grain stage. This may push grain prices up later in the year, but will make extra hay available.

NEW ZEALAND

• Milk production: is near the seasonal peak with forecasts that milk production will be 5 to 10% down from last year. September milk production was down 7.5% from September 2014, and the decrease is likely to continue into 2016.
• Weather situation: the cold, wet weather is affecting forage growth and cow comfort: this contributed to the decrease in milk production.
• Milk producers: the decrease in feed efficiency along with the low farm levels prices have led farmers to cull more cattle.

MILK PRODUCTION

• Australia *: +2.97% (Jul-Sep 15 vs. Jul-Sep 14)
• New Zealand *: -4.02% (Jun-Sep 15 vs. Jun-Sep 14)

BUTTER (82%): prices are up due to limited Australian supply and higher U.S. prices. The recently rising prices are making exporting to the U.S. less attractive. Domestic demand is strong in Australia. Export demand in Oceania has slowed. AMF prices have strengthened due to similar pressures. Butter manufacturing is now limited and supplies are low.

CHEDDAR CHEESE: a modest uplift in pricing. Production is stable to increasing as domestic and foreign consumption is growing.

SMP: prices for SMP are up following upticks in global pricing. Some manufacturers are finding it more profitable to make butter and SMP than other dairy commodities. Production is uneven as some manufacturers are producing only enough to fulfill current contract needs. Some sellers are reporting an increase in export demand.

WMP: prices are steady to increasing, following a drop in current global offerings. The increased production of WMP in Europe has affected demand: this resulted in a reduction in Oceania WMP production. Several manufacturers have channeled milk supplies to other dry dairy products, while some manufacturers are making and storing WMP in preparation for future demand.

The TPP (Trans-Pacific Partnership) agreement was concluded and will make it easier to access markets that have been restricted.

During October the lower New Zealand milk production that is forecasted aided in the rise of dairy commodity pricing. However the GDT auction index was down 7.4% in November 3rd.

CLAL.it – Butter prices in Oceania, US and Germany

Note: · Assessments about market trend are expressed in US$; · * Dairy season: July, 1st – June, 30th (Australia), June, 1st – May, 31st (New Zealand).

Source: USDA summarized by the CLAL Team

More informations about milk production in New Zealand and Australia are available on CLAL.it