Dairy price rise case of 'when not if'

DairyNZ research and the latest economic outlook for dairy farming was outlined at a Farmers Forum, organised by DairyNZ, in Balclutha last weekend. Agribusiness reporter Sally Rae went along.

Medium-term prospects for dairy prices remain ''solid but not spectacular'', Rabobank's director of dairy research New Zealand and Australia, Hayley Moynihan, says.

The 2014 15 season was further evidence of the market volatility expected to continue in global dairy markets, Ms Moynihan said.

A recovery in prices was all about ''when and not if'' but the recovery was likely to be more prolonged than seen in 2009 10 and 2012 13.

A greater number of variables were now impacting on farm enterprises. It would be important ''to manage what you can influence'' and farm business resilience and maintaining competitiveness would determine ongoing success, she said.

It was difficult to see what was going to trigger a really quick turnaround in commodity prices and it was looking like a slow adjustment, she said.

There was so much going on in global markets and the big drivers in the market at the moment were largely factors ''beyond our control''.

One aspect she did not think was talked about enough was the demand and consumption side of the market, which had been one of the important factors, particularly over the past 12 18 months.2014 had ''caused a few blips'' with softening demand at the same time as a lot of milk was being produced all over the world.

China exemplified that, having gone from empty shelves in supermarkets in September 2013 to reports of milk being tipped out by smallholder farmers.

The change in scenario happened quite quickly and that market was still rebalancing. How that played out was going to be very important, she said.

Rabobank believed imports into China would be about half the level of last year, which was a ''pretty big change'' compared to the past several years.

The other main adjustment was in Europe with quotas being removed a month ago and European producers free to produce as much as they liked.

Production in the United States kept on ''trucking'', with a combination of more cows and more production per cow.

Very efficient large scale units were making the most of low cost grain. The US industry was looking more to export markets and, increasingly, it would come to the market as powder.

 

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