Friday, March 29, 2024

Milk production keeps rising

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Overproduction of milk in the United States and signals that countries in the European Union will increase milk production do not bode well for world dairy price recovery.
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The West Springfield plant of Agri-Mark in New England, US, dumped excess skim milk after producing both butter and skim milk powder to capacity.

The reason was good summer weather for milk production exceeding the capacity of the local plant and the higher value of the US dollar limiting export opportunities, an Agri-Mark spokesman said.

A local farmer-supplier said his farmgate milk price had fallen 26% in the past year and that one recompense was to produce more milk.

Agri-Mark is a New England dairy co-operative with 1200 supplying farms.

Processing plants throughout the northeast dumped 30% more milk during May, according to official statistics.

That milk would normally have been trucked further west for processing but there was no spare plant capacity.

Even though milk prices to US farmers had fallen 25-30% the milk-to-feed price ratio was still favourable, encouraging higher production.

In Europe the latest milk production figures showed higher volumes for some countries but slightly lower for major dairy countries like Germany and France.

Ireland’s milk output was up 11% year-on-year, Poland up 4% and the Netherlands plus 1.7%.

The figures included only two months of production without EU dairy quotas, abolished from April 1, but indicated some of the second-level dairy producing countries were already boosting output despite low world prices for dairy commodities.

The authors of a newly published report called The European Dairy Industry Towards 2020 said all countries would increase production steeply if there was an opportunity, presumably a strong price signal.

Promar International consultancy said European production was about 140 billion litres annually, 83% of which came from the top nine countries—Germany, France, the United Kingdom, the Netherlands, Poland, Italy, Spain, Ireland and Denmark.

Until recently the rules preventing sales of quota between countries and penalising above-quota production had kept production levels and the rankings of countries steady.

Based on interviews, Promar forecast milk production would increase between 6% and 20% over the next five years.

It said seven of the nine top countries would increase production, leaving only Spain and Italy to decline.

It also mentioned environmental constraints for intensive producers like the Netherlands and the lack of processing capacity in the UK, which would need to be addressed.

But when the Promar report was publicised Russia also confirmed its trade ban on western food imports would continue and the blacklist would extend to August 2016.

It followed an earlier announcement by the EU that economic sanctions against the Russian federation would continue for a further six months.

Before the ban Russian bought 27% of Europe’s cheese exports and 19% of butter exports.

“Dairy markets have been operating without access to Russia for nearly a year now so the extension of the ban should not have any immediate impact on wholesale prices,” the Agriculture and Horticulture Development Board of the UK said.

Meanwhile, the share price of Fonterra’s Chinese partner Beingmate Baby and Child Food Co on the Shanghai exchange fell from nearly 30 yuan to only 12 in one month.

On paper, the shareholding value was now only two-thirds of the $700 million Fonterra agreed to pay for its 18.8% stake in March, at 18 yuan a share.

However, there has been a 10% devaluation of the NZ dollar against the Chinese currency since March, about $50m benefit to Fonterra, moderating its book loss to $200m.

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