GLOBAL - Milk prices are unlikely to recover before the second half of 2015 as major exporters continue to crank out milk and the market waits on China.
This is according to DairyCo analysts foreseeing no let-up in northern hemisphere production any time soon.
Expansion of US and EU herds were reasons given, although DairyCo said margin pressure could lead to an eventual production drop.
DairyCo highlighted that there is more milk this year than last.
“Arla announced a cut to its member’s milk price for December,” said DairyCo. “This latest cut is likely to lead to questions over when the current round of price cuts may end.”
Key exporters produced nearly 8 billion litres more in January to September 2014 than they did over the same period in 2013, says data from Eurostat, DCANZ and the US Department of Agriculture.
Change has been the biggest in New Zealand, up 12 per cent, with EU up five per cent and the US up again on last year’s modest gains, two per cent higher.
Further pressure comes from Russian sanctions.
And, despite Russia expecting lower production, imports are to stay static, says the USDA.
Belarus will cater for liquid milk needs as a pressurised domestic supply will see processors profiteer from a gap, making room for value-added products.
The volatility of the market was shown by a recent global dairy report which calculated a 27 per cent price increase for last year.
Many dairies enjoyed improved profitability for 2013 as production costs fell by 70 cents, said the International Farm Comparison Network.
Globally, average cost level fell to $46.5/100 kilos ECM (energy corrected milk formula).
In its Dairy Report 2014, it offered a bright outlook for the future.
“Demand will continue to grow due to market recoveries and possibly will not be satisfied by milk supply,” said the IFCN.
“World dairy stocks are reducing and milk and feed prices will be kept at relatively high levels.”
Summarising China’s effect on the market DairyCo added: “The return of the Chinese to the markets is viewed by many dairy analysts as critical to when dairy commodity markets start to stabilise, but when this is likely to happen remains uncertain.”