Milk production in the main exporting countries was beginning to respond to high farmgate prices and that might mean prices had peaked for this cycle.
Chinese milk supply was facing some headwinds and rejuvenated import buying had supported world prices, the latest Rabobank Global Dairy Quarterly said.
As New Zealand and Australia approached their spring peaks of production some pressure would be applied to the global market but that was not expected to be overwhelming, the analysts said.
With input from analysts around the world, Rabobank said Europe’s milk production growth rate was higher now than in 2016.
The United States industry had notched up more than 40 months of consecutive milk supply growth and that would continue, with regional variations.
Production in August was 2% higher, year-on-year, helped by good milk prices and ample corn at 10% cheaper prices.
But US dairy consumption growth rates had slowed and stocks of skim milk powder were growing.
On balance, Rabobank predicted only a modest increase in exportable surplus over the coming 12 months.
A solid rebound in milk production was under way across South America but dairy consumption was subject to economic headwinds.
The very wet start to the 2018 season in New Zealand was holding down milk production but conditions could improve, local dairy analyst Emma Higgins said.
In the first quarter of the new Australian season milk production returned to growth after seven successive quarters of decline.
The season should deliver 2.5% growth, supported by improving farm profitability and favourable seasonal conditions.
“With more milk hitting the global market, the resilience of Chinese import purchases will be crucial when it comes to keeping markets in balance,” the report said.
“Chinese demand has improved, local supply is facing headwinds but faltering demand will quickly see the market over-supplied.
“Now the infant formula brands that have been registered are being announced, this will lead to short-term restocking of these brands by distributors.”
Rabobank forecast that whole milk powder prices would be US$3200/tonne in the final quarter of 2017, falling into the $2900 to $3100 range next year.
It predicted that butter would fall from $6000 to $5300 by this time in 2018.
Cheddar cheese would fall from $4200 to $3600 over the next 12 months and skim milk powder would stay around $1900 on average because of the European Union stocks hanging over the world market.
The Australian dairy year ended in June with a milk production volume down by 6% to 9.015 billion litres.
“The latest rainfall outlook suggests spring conditions will be mostly normal across southern Australia, which is welcome news.
“Nevertheless, debt levels are high onfarm, equity needs to be rebuilt and confidence levels are still low, although improving.”
Murray Goulburn was predicting $5.20/kg MS while other processors were in the range $5.70 to $6.10.
“The outcome of Murray Goulburn’s strategic review and reports of a variety of third-party proposals continue to dominate industry headlines.
“The company is considering all options.
“Any major transaction will require 90% shareholder approval,” said report lead author and senior dairy analyst Michael Harvey, based in Melbourne.
