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June 2015 Dairy Update

Friday, 26 June 2015 at 12:04pm

Fresh Agenda are food consultants and analysts who focus on the food industry, with expertise in interpreting market and supply chain conditions in a number of food sectors.

Their latest report looks at the supply and demand outlook for dairy commodities over 2016/17.  They take into account each country’s drivers of production and use.

As you will be aware dairy prices have been volatile this year and this is reflected in the report. Milk prices have fallen globally while production has increased. In some instances stockpiling has occurred by countries taking advantage of low prices. Given the current state of the dairy commodities market Fresh Agenda think a market recovery won’t happen until 2017.

One of the big questions for New Zealand dairy farmers and investors is when will China re-enter the Global Dairy Trade (GDT) market for Whole Milk Powder (WMP) at levels seen previously?  In the last two years half of New Zealand’s whole milk powder has gone to China, making us their major supplier. So it is a given that any future pricing will be determined by China’s demand for our WMP.

In addition to their report, there is also discussion this month about the potential closure of Fonterra’s guaranteed milk price scheme (GMP). The GMP was introduced in 2013, allowing farmers to lock in 75% of their production at a guaranteed price, to provide price certainty to those participating farmers. While the scheme had a successful pilot there has been questions raised about its success and whether this scheme will stay.

In other news, a cold snap across the country is a reminder that winter is not yet over. Feed grains and palm kernel are in good supply but demand can change fast so farm managers have to plan well ahead. This is especially important given the prediction of El Nino weather patterns later this year.

Good news also that the Chinese dairy Company Yili, owners of Oceania dairy, have established a new research and development centre at Lincoln University.  Both organisations look to develop new ideas in processing, food safety and farm management.

Watch this space for WMP price updates and further GMP discussion.

 

To see further discussion and reports by Fresh Agenda visit their website - http://www.freshagenda.com.au/