Dairy market paints ‘very bearish picture’

June 4th, 2012

By:

Category: Miscellaneous

(AgriMoney.com) – Dairy market prospects paint a “very bearish picture”, National Australia Bank warned, after data showed Australia fuelling the wave of world milk production growth, while Chinese imports slow.

A fall in dairy prices to their lowest since 2009 is being driven by “what can only be described as a massive production response to high prices”, NAB agribusiness economist Michael Creed said.

“Production through the year across all major exporters has lifted significantly while there appears to have been little in the way of supply disruptions.”

The comments followed the release of data showing that Australian output soared 7.7% year on year to 661m litres in April, nudging the pace of growth in the 2011-12 season, which ends this month, to 4.3%.

Parts of northern Victoria and Tasmania are “finishing the season strongly with very favourable dairying conditions, offsetting adverse dry conditions in western Victoria,” industry group Dairy Australia said.

‘Very bearish picture’

The data were the latest in a series showing continued strong production in many leading exporting countries, with output rising 3.2% in April in the US, and by 4.7% in the European Union, according to official data.

Latest industry statistics for New Zealand, the top exporter show a 13.1% rise in production for February.

“In all, this paints a very bearish picture, particularly as Chinese milk powder imports appear to be slowing,” Mr Creed said.

Chinese imports of whole milk powder fell to 26,300 tonnes in April, down more than one-half year on year, after a strong start to the year encouraged by a – limited – easing in tariffs on imports from New Zealand.

Separately, the UK’s DairyCo bureau said: “An economic slowdown in the BRIC countries, notably China, and financial eurozone uncertainty is weighing down on global dairy markets.”

And, with surplus milk being converted into dairy commodities for sale on international markets, “rising inventories are putting downward pressure on [prices]”.

Further falls ahead?

Mr Creed forecast “further near-term pressure on prices”, which would stabilise “later in the year”, an outlook similar to that portrayed by Fonterra, the New Zealand-based dairy giant.

The comments come ahead of Fonterra’s latest globalDairyTrade auction, on June 5, events viewed as market benchmarks.

Fonterra has reduced to a total of 27,800 tonnes the products of offer, including 18,000 tonnes of whole milk powder compared with 25,000 tonnes at the last auction, two weeks ago.

 

Add New Comment

Forgot password? or Register

You are commenting as a guest.