Friday, February 23, 2024

The dairy market needle’s shifted

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Global prices continue to fall short of EU prices.
NZ production has continued to decline with weather the major contributor.
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By Stuart Davison, NZX dairy insights manager

The wider dairy market is in a rapid flux at the moment, with key indicators swinging over the last two weeks, resulting in our outlooks changing somewhat. This is a summary of our outlook currently: 

Recent commodity price hikes have driven countries to reduce their imports of EU products, shifting to other regions’ products, or less of all. As a result, the EU is currently sitting on excess stock, and prices have begun to retreat in order to start exports moving. 

As global prices continue to fall short of EU prices, as seen in GDT event 317, the EU will need to continue to reduce their prices in order to meet export desires. This is likely to be exacerbated by milk production increases out of the region. Over the last five weeks, EU weekly milk collection figures have begun to increase, with German & French milk collections now exceeding 2021 figures for the first time this year. 

The US also continues on the cusp of increasing their production levels, and with domestic consumption forecast to drop moving forward, the US will likely look to move more dairy to exports – into a global market light on demand. All while the US milk price remains supported due to current high cream prices. 

China’s production has taken a hit with the nation’s drought and flooding impacting pastures, grain and feed production. This has halted the decline in the domestic raw milk price and has increased imports momentarily; however, there is still decreased demand within the nation with buyers less willing to chase product or prices. 

What does this all mean?

On a whole, expectations are for prices to remain supported at best, globally. Production increases out of two of the major production regions will shift the market around, creating pressure for prices. NZ production has continued to decline with weather the major contributor.

Typically NZ prices would respond to production declines, however, after two positive GDT events, event 317 saw the opposite. Historically, we would expect prices to start to trend higher again as we approach the end of the year; however, this year this expectation is starting to fade, with concerns of greater downward pressure now on our minds.

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