Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


Global dairy price recovery is likely 6 months away

Rabobank: After recent slide, global dairy price recovery is likely 6 months away


As anticipated, global dairy prices softened considerably through Q2. According to Rabobank’s Dairy Quarterly Q2: Beyond the tipping point, prices fell as a result of improved milk production in export regions and the easing of forward purchasing by China. These mechanisms freed more product for other buyers and lowered the need to ration demand with international dairy commodity prices falling 10% to 20% in the three months to mid-June.


“The pull back in Chinese purchasing has been particularly significant, with evidence that the Chinese industry has accumulated excess inventories after a period of vigorous buying, improved local milk production and weaker local sales. Current prices in the international market have dropped below what we see as sustainable in the medium term,” explained Rabobank analyst Tim Hunt.


Milk production growth will slow considerably in the second half of 2014 as lower prices are passed to producers, weather normalises and comparables become tougher to exceed.Consumption in export regions will also slowly improve on the back of higher incomes, employment growth and falling retail prices.


“Together these forces should gradually tighten up the market as we progress through 2014,” continued Hunt. “However, we expect little improvement in prices until late in 2014 or early 2015, as China works through its accumulated stocks and the worldcontinues to consume the stronger than expected wave of milk produced in the first half of year.”


The report notes that one upside risk to keep an eye on is a developing El Nino event. This has the potential to generate unusually dry conditions in South East Australia and excessive rainfall in Argentina – and hence reduced milk production in both of these export regions.


Regional outlooks


EU: 2014 has seen an extraordinary increase in EU milk production. Margins were high enough for many to simply choose to produce over quota limits, with production in the EU up 5.6% on Q2 last year. Growth is expected to continue outpacing domestic market consumption during 2H, although exportable surpluses are anticipated to slow considerably.


US: US wholesale prices have slipped considerably less than those in the external market. They are in many cases at a significant premium to the world market in mid June and are expected to fall faster than elsewhere through 2H as exports fall back and domestic milk production picks up.


New Zealand: New Zealand production was up 17.5% versus the same period in drought-impacted 2013. Export volumes are expected to trend well above the previous year through Q2 and Q3 2014 due to higher milk flows providing additional volume to be shipped during the seasonal trough versus 2013.


Australia: The outlook for 2014/15 remains broadly positive for most dairying regions. While early price signals confirm southern export producers will face Rabobank Nederland lower farmgate pricing in 2014/15 due to lower commodity prices, the market should remain supportive of investment.


Brazil: Brazilian milk production declined seasonally from its December peak, as usual, but much more slowly than last year. There is likely to be little in the way of imports into the Brazilian market in 2H, while exporters will be trying to find ahome for Brazilian production in the region and beyond.


Argentina: Argentine milk production is expected to continue to fall below prior year levels in the second half of 2014. While margins over feed remain positive, other costs are subject to rapid inflation. In addition, a looming El Niño event is likely to bring above average rainfall from spring onwards, creating further problems on farm.


ends

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Pre-Budget: Computer Emergency Response Team, Assemble!

John Key told the country's first ever Cyber Security Summit in Auckland that the government had earmarked funding set up a national Computer Emergency Response Team to help prevent and act on cyber incidents in partnership with the private sector and other organisations. More>>

ALSO:

Job Cutter Goes: Mark Weldon To Step Down As MediaWorks CEO

“When I joined MediaWorks in August 2014, I had a mandate to lead a significant change programme to bring the business back from receivership into a position where it could once again be a strong competitor in the market, with a sound and sustainable future. It was a big brief, laden with inherent challenges, but I took it in good faith and have dedicated myself fully to the goal since." More>>

ALSO:

Must Sell 20 Petrol Stations: Z Cleared To Buy Caltex Assets

Z Energy is allowed to buy the Caltex and Challenge! petrol station chains but must sell 19 of its retail sites and one truck-stop, the Commerce Commission has ruled in a split decision that acknowledges possible retail price coordination between fuel retailers occurs in some regions. More>>

ALSO:

Huntly: Genesis Extends Life Of Coal-Fuelled Power Station To 2022

Genesis Energy will keep its two coal and gas-fired units at Huntly Power Station operating until 2022, having previously said they'd be closed by 2018, after wringing a high price from other electricity generators who wanted to keep them as back-up. More>>

ALSO:

Dammed If You Do: Ruataniwha Irrigation Scheme Hits Farmer Uptake Targets

Enough Hawke's Bay farmers have signed up for water from the proposed Ruataniwha Water Storage Scheme for it to go ahead as long as a cornerstone institutional capital investor can be found to back it, its regional council promoter announced. More>>

ALSO:

Reserve Bank: OCR Stays At 2.25%

Reserve Bank governor Graeme Wheeler kept the official cash rate at 2.25 percent, in a decision traders had said could go either way, while predicting inflation will pick up as the slump in oil prices washes out of the data and capacity pressures start to build in the economy. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news