A delay in the sustained upturn in global dairy prices will continue to have a ‘‘profound impact'' on New Zealand's dairy industry, Rabobank's general manager country banking New Zealand Hayley Moynihan says.
Cash flows were expected to remain at low levels well into the 2016-17 season, she said.
Rabobank's latest dairy quarterly report said little upside was now foreseen until the second half of 2016. Stronger than anticipated production out of the European Union had delayed the recovery in global markets.
European milk production was still advancing strongly following the removal of quotas earlier this year, with milk deliveries over that period up by 2.8%, a rise of more than two billion litres.
The strength of post-quota supply growth, particularly out of Ireland and the Netherlands, was evidence that their investment in cow numbers and on-farm infrastructure had been stronger than anticipated, report co-author Emma Higgins said.
EU milk prices had also held up better than expected, aided somewhat by the recent depreciation of the euro, with prices remaining above operational costs and therefore not acting as a significant deterrent to production, Ms Higgins said.
With prices remaining below the cost of production for many New Zealand dairy farmers, and for the third consecutive season, it could be particularly stressful for producers and their families, Ms Moynihan said.
Revised market indicators were pointing towards an improvement in cash flows midway through the 2016-17 season.
Despite production growth slowing considerably in the southern hemisphere and also the United States, the global market would remain oversupplied until the ‘‘brakes'' were also applied in the EU, the report said.
