Farmers are now bracing themselves for their toughest season yet. Milk powder prices are now at 12 year lows. The NZX Dairy Derivatives market indicates further price falls are likely at the next GlobalDairyTrade auction.
It is difficult to see prices firming in the coming months. In-market stocks need to clear before prices will move higher. It is possible that this will happen before the end of 2015.
Milk production across the globe is still growing but the rate of growth has slowed. The impact of low farmgate milk prices is being felt across the globe. In France farmers have taken to the streets to voice their distress. In NZ farmers are closing their cheque books.
Demand for supplementary feed has dropped and feed prices have fallen accordingly. Dairy stock values are falling and land values are expected to soften a little. Extra cows were culled during the autumn and this trend is expected to resume again later in the season.
Cull cow prices near record levels will entice farmers to cull more heavily than normal.
But if we look ahead there are some bright spots on the horizon. The low prices are stimulating demand in some markets and milk production is now slowing. So its only a matter of time before the markets are back in balance.
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Susan Kilsby is senior dairy analyst for AgriHQ. She is the editor of weekly report Global Dairy Snapshot and Monthly Dairy report. Prices for Oceanic-sourced dairy products are collected by AgriHQ and published in the Global Dairy Snapshot. The Monthly Dairy report provides an in-depth account on the key factors influencing the dairy industry, both internationally and within New Zealand.
