Markets are relatively balanced. Prices are expected to bump along near current levels for the rest of the 2016-17 dairy season.
Global milk supply remains tight and will stay that way at least until northern hemisphere milk supply cranks up in the second quarter of the year. Supply from Oceania is expected to remain tight throughout the season as poor weather and financial constraints limit output.
The drop in milk production in both New Zealand and Australia this season means dairy products from these countries are achieving premiums in the global market.
However, when price differentials get too great we start to see some buyers altering their buying patterns in favour of product from other countries. The tight supply out of NZ was responsible for the whole milk powder (WMP) price lifting far above the price for skim milk powder in the later part of 2016. That has now corrected because more milk was directed into WMP, alleviating tight supply.
Demand for dairy products remains robust in most of our larger markets. Steady buying from Asia is offsetting weaker demand from the Middle East and north Africa, where economies are slowing because of low returns from oil.
Milk fat remains in high demand because consumers’ dietary trends in developed nations favour natural products over artificial products.
The AgriHQ milk price forecast sits at $6.40/kg of milksolids for this season. Milk price futures are priced at $6.30/kg MS for this season and at $6.40/kg MS for next season.
