The global dairy market outlook will remain weak throughout 2016, but with more upward pressure on prices as we head into 2017, according to the Rabobank Global Dairy Quarterly Q1 2016 report.
Global dairy commodity US dollar prices have continued to stumble along a market floor largely determined by the level of EU intervention support.
The short-term outlook remains pessimistic. In the face of a cripplingly long price trough entering 2016, production growth in the world’s milk production regions has continued to slow.
“Looking forward, the news is by no means all bad for the dairy industry,” said Kevin Bellamy, Rabobank’s Global Dairy Strategist.
“With the exception of Brazil – gripped by the worst recession in a generation – Rabobank sees dairy consumption continuing to grow in Asia, as well as in the US and EU.”
In market news, the latest Global Dairy Trade (GDT) auction results showed a rise of 2.1 per cent in the GDT Price Index since the previous event.
Skimmed milk powder rose in price by 0.1 per cent and whole milk powder by 1.5 per cent, but cheddar was the big winner with a price rise of 10.5 per cent. Despite this, butter prices fell by 2 per cent, and butter milk powder prices fell by 8.2 per cent.
In New Zealand, the Federated Farmers organisation has welcomed the announcement that the Financial Markets Authority and Reserve Bank have formally approved NZX’s milk price futures and options contracts.
Expected to launch in May 2016, these are designed to address growing demand from both producers and purchasers of milk to manage risk around price fluctuations.
“It won’t be for everyone, but this will give New Zealand dairy farmers a risk management tool that makes their business less susceptible to significant price fluctuations,” said Federated Farmers Dairy Industry Chair Andrew Hoggard.