New Zealand milk production in the seven months to the end of December was 5.5% behind the corresponding period in 2015 and 7.6% behind in Australia, Fonterra said in its January global market update.
European milk production also declined for the fifth consecutive month in October but United States production was still growing, as were its exports.
Rabobank also made further observations on the US situation in its quarterly dairy market publication, saying the strengthening economy would flow into a stronger dollar and headwinds for dairy exporters.
“That will, at the same time, act as a limiting factor on the level of price rises in US dollar-denominated dairy markets,” analyst Emma Higgins said.
A stronger US dollar would also reduce the affordability of dairy products in emerging markets and test demand.
The affordability issue was likely to counter some of the upward price pressure as the price rally continued to develop.
Developments in dairy industry environmental regulations in The Netherlands were also a key factor to keep an eye on, Higgins said.
“The Dutch industry is wrestling with the issue of how to operate within the limited levels of phosphates and nitrates which can be applied to soils under European environmental regulation – and complying with these regulations is likely to require a significant reduction in their cow numbers,” she said.
