Global Milk Crisis: a Downward Trend in Milk Prices

ANALYSIS - Global milk prices are falling, leaving many producers in desperate situations as costs of production in many countries continues to increase. Charlotte Johnston, TheCattleSite editor gives a brief summary of the situation.
calendar icon 10 July 2012
clock icon 3 minute read

Producers across the world are facing falling milk prices and as frustration mounts so does the threat of direct action.

Whilst many blame the oversupply of milk production for the price drop, falling prices seems to be a common trend in all commodity markets.

The most recent global dairy trade auction results from early July saw milk price contracts fall six per cent. Anhydrous milk fat (AMF) and skim milk powder (SMP) took the hardest hit, falling by 10.4 per cent and 9.8 per cent respectively. The dairy trade-weighted price index has fallen more than 30 per cent since hitting a near four-year peak in March 2011.

In many EU member states farm-gate prices have already slid under the €30 cent mark, and the trend is downwards. Since November 2011 average milk prices have fallen in Belgium from just over 34 cents to 26 cents, in Germany from 36.90 cents to 29.80 cents and in France from 33.13 cents to 28.50 cents in May 2012.

Action is planned to take place this week outside the European Parliament in Brussels. The European Milk Board is calling for producers to gather together for a demonstration to let politicians know the plight of EU farmers.

Following a number of large processors announcing price cuts in the UK recently, the industry has rallied together to demand the immediate reversal of milk price cuts.

A dairy crisis meeting is taking place in London this week, with over 1000 participants expected.

Farmers for Action Chairman, David Handley has said that if nothing is resolved direct action will be taken through the disruption of the milk supply. There are threats that this will coincide with the Olympics.

In the US milk production is rising year on year, despite milk prices 23 per cent lower than this time last year. Drought is putting pressure on corn and other feed supplies and threatening to further increase costs of production.

In Australia the supermarket price war is taking its toll on producers as price cuts come into force. Reports this week state that supermarket giant, Woolworths is putting pressure on milk suppliers to cut prices.

The industry has condemned this saying that any price cuts from suppliers will impact on farmgate price paid to farmers. The industry is pushing for greater transparency in dairy companies' pricing structures.

In May 2012, New Zealand co-operative Fonterra lowered its end of season milk payout forecast by five per cent in response to what it described at the time as "softening global dairy commodity prices". The co-operative also announced a 13 per cent decrease in its payout forecast for the 2012/13 season.

A recent outlook by Rabobank seems to provide a more positive long term outlook, with predictions that supply of dairy commodities will ease off during the second half of 2012. Whilst prices will continue to fall in the short term, they will start to recover in early 2013.

How long the crisis will last and when prices will bottom out still remains to be seen.

Charlotte Johnston, Editor

Charlotte Johnston - Editor

© 2000 - 2024 - Global Ag Media. All Rights Reserved | No part of this site may be reproduced without permission.