NZ is leading the decline but the latest data shows a smaller reduction than some had been expecting.
Reports last week suggested international buyers didn’t yet believe NZ’s seasonal milk production would see a substantial fall.
Radio New Zealand News quoted Rabobank global strategist Tim Hunt: “We constantly speak to our clients about the expected slow down in New Zealand supply this year and really a general trend to slower growth in the medium term, but New Zealand has surprised so many players in this market by year after year achieving fantastic growth for most of the last 15 years, that some of them have stopped believing that slow down will ever come.”
October’s milk production in New Zealand is down 2.7%. This follows a 7.2% fall in milk production in September.
October is the peak production month for New Zealand and by the end of October last season 34% of the season’s milk had been produced. For the season to October, cumulative milk production is down 3.3% on a year earlier.
After this data release, NZX dairy futures fell back, although are still indicating a rise at the next GDT auction.
To have a big effect on the turnaround of markets it’s not just NZ that needs to be reducing milk production.
The US, too, is slowing down. It is still (just) in growth mode. At 0.1% year-on-year growth for October, the pace has slowed from 0.4% in September.
Australia has sunk to negative territory and milk production for October is down 0.4% on a year ago. Cumulative volumes to October are 2% ahead of a year ago after being 3.1% ahead to the end of September.
Current EU milk production figures aren’t showing signs of reduction yet. August deliveries were up 2.8% from a year earlier. Year-to-August cumulative volumes were 1.3% ahead. September deliveries were 3% ahead and cumulative deliveries to September were up 1.5%. Expansion continues.
While global milk production is slowing its not at a particularly fast rate and buyers aren’t yet sold on its substantiality.
The next few months of the El Nino phenomenon will be key in defining the effect on production.
