Agribusiness analysts have revealed predictions that New Zealand is set to increase milk production by 4.5% when compared to the previous season.
According to Informa’s Agribusiness Intelligence, this comes at a time when dairy prices are increasing worldwide and panic orders continue across the EU.
Following a price crisis for world dairy farmers earlier in the decade, global prices for milk and other dairy products look set to grow strongly during 2017.
As demand outstrips increases in supply on international markets, global prices are predicted to roughly 30%, according to predictions from Informa.
As prices began to recover in the latter half of 2016, dairy production has seen an increase across the world’s biggest producers.
Despite an EU initiative to incentivise a reduction in output, milk production across the bloc still increased by 0.5% during 2016.
However more significant is the increase in dairy supply from New Zealand, where dairy output is expected to increase by 4.5% compared to the previous season.
China and infant milk forumla
Dairy demand had been predicted to surge due to the ending of China’s One Child Policy in 2015.
During 2016, there were 16.9 million new births in China, an increase of 470,000 (or 2.78%) compared to the year before. This baby boom was expected to lead to a surge in demand for infant milk formula (IMF).
However, the increase in births and demand for IMF has not been as great as many expected and increased concern that China is over leveraged are suggesting that prices may cool in the latter half of 2017.
Weather remains a key concern
Informa’s Agribusiness Intelligence is predicting prices will face pressure later in the year as Oceania producers respond to favourable farm level margins and as rising commodity prices hamper demand as work their way through the supply chain.
However, if weather is unfavourable in Oceania during their peak production season, the dairy market will be in for a turbulent ride as supplies remain tighter than most market participants had expected.
“Dairy prices have been soaring as buyers across the EU place panic orders, and there has already been talk of butter shortages by Christmas,” commented Nate Payton, ?Director of Dairy Services at Informa’s IEG Vantage.
“The good news is that the global market is beginning to respond, and an increase in supply from New Zealand and the US should go some way to cooling prices and filling the demand by the end of the year.”
Source: FARMING UK