Up to 30% production rise tipped

The final three months of New Zealand's dairy season are expected to see milk production at least 20% to 30% higher than last year's drought-impacted finale.

While export volumes could be expected to taper off through season-end, shipments were likely to continue to trend at least 10% above the previous year because of higher milk flows, Rabobank's latest dairy quarterly said.

The bank expected an easing of global milk prices from the mid to late second quarter.

ASB economists were expecting the basket of New Zealand dairy prices to average about 15% lower next season, compared with the current season average.

The Rabobank report said a stronger northern hemisphere production season, on the back of an exceptional season in the southern hemisphere, should generate more than enough exportable supply to exceed China's ''extraordinary'' additional needs from the world market.

The ''most crucial'' demand-side question was whether China would sustain the frenetic buying that had been seen on the international market throughout the past 12 months, Rabobank analyst Tim Hunt said.

In the EU, Rabobank expected production to rise by 4% year on year for the first half of 2014, fuelling a surge in exports.

Fractional growth in the second half of the year would be boosted in first-half 2015 when current quotas were eliminated and the EU would likely make a substantial contribution to boosting international supply.

The US domestic market was expected to show only modest growth over 2014, as slow economic growth and reductions in SNAP (Supplemental Nutrition Assistance Programme) payments were compounded by further increases in retail pricing.

In Australia, improved seasonal conditions and increased farm-gate prices for southern producers saw a recent marginal rise in milk flows. Rabobank expected a further recovery in milk flows in the first half of this year, on the back of better weather and higher milk prices.

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