By Cristina Alvarado, NZX data & insights commercial manager
March presented a complex landscape for the dairy industry as the month was marked by volatility, regional production shifts and evolving trade patterns – highlighting the industry’s resilience.
A comprehensive analysis of key factors, including the Global Dairy Trade (GDT), milk production in New Zealand and worldwide, dairy exports and a forward outlook offers insights into the industry’s current state and future trajectory.
The past month witnessed a significant shift in the GDT indices. The downturn was largely anticipated, attributed to the customary drop in demand post-Chinese New Year and the Middle East’s pre-Ramadan stock supply. Whole milk powder (WMP) prices declined by -7.2% from Event 350 to Event 352, while skim milk powder (SMP) recorded a -9.7% decrease during the same period.
However, the downward trend was reversed in the first event of April, with the GDT Index increasing by 2.8%, indicating a potential rebound in prices after the temporary decline observed in March.
Milk production trends continued to vary across regions. In NZ, February’s milk production showcased resilience, with an average daily milk solids growth of 2.8% year on year, driven by favourable weather conditions. However, projections indicate a potential decline in March’s production and for the remainder of the season, with NZX’s milk production predictor anticipating 1.6%, 1.1%, and 5.3% YoY declines for March, April, and May.
Regarding milk price, NZX’s milk price calculator had an increase in the first week of April, following GDT Event 353, lifting the price for the remainder of the season to $7.82/kgMS.
In addition to this, by the end of the first week of April, all SGX-NZX dairy derivatives commodity futures and milk price futures ended with prices up across all contracts.
Meanwhile, global milk production trends remained mixed. Europe reported a slight YoY drop of 0.2% in January, the United States witnessed growth in February of 2.2% YoY (but down -1.3% YoY after leap day adjustments), and Argentina faced significant declines (-17.7% for Feb adjusted to leap day).
On the other hand, Australia and Uruguay reported growth in production, (4.9% and 3.5% YoY each adjusted to leap day), highlighting continuing regional disparities in output.
On the export front, NZ emerged as a prominent player, reporting a remarkable 33% increase in dairy exports by volume for February. This surge was fuelled by significant growth in WMP (76%), anhydrous milk fat (AMF) (62%), and milk protein concentrate (MPC) (84%) exports.
Notably, WMP exports to China doubled compared to last year, and volumes to the Middle East surged by 176%. However, Europe reported a -3.0% decline for their January exports, and the US, after its January -6.6% YoY decline, has had a comeback with February exports increasing 12.7%% YoY led by growth in cheese exports (+32.1% YoY).
Australia and Argentina exports increased in January YoY by 17.1% and 18.7% respectively.
Given the circumstances, staying informed and flexible will be key to weathering whatever comes our way in the dairy world.
Looking ahead, the dairy industry faces a myriad of challenges and opportunities as it progresses into the second quarter of 2024.
Uncertainties persist, such as the recent avian flu outbreak in the US, affecting (at the time of writing) six of the 24 major dairy states, and also with reported cases of the flu being passed into humans.
This emphasises our belief that proactive strategies and robust market insights will be essential for stakeholders to navigate the evolving landscape.
The industry must remain agile in responding to changing consumer preferences, supply chain disruptions, and geopolitical tensions.
Furthermore, sustainability and innovation will continue to drive long-term growth and competitiveness in the global market.
