Milk Production and Prices

Have we reached the turning point in the dairy market?  Some in the industry believe so, but none are forecasting a quick recovery or a return to 30ppl anytime soon.  There certainly seems the prospect of some light at the end of the tunnel, with production finally looking like it is easing back.  UK deliveries for the first two weeks of May averaged 43.0 million litres per day, some 3.7% lower than for the same period last year; although deliveries were still 1% higher than the three-year average. 

Further afield, New Zealand milk production in April was down by 2.5% compared to the same month in 2015.  The season to date in NZ is 1.7% lower.  Production in Australia also fell by 4.5% in March.  However, April’s production in the US was still up by 1.2%, although slowing compared to March (at 1.8% higher).  And production in the EU was still 3% higher in March than in 2015.  But with continued low milk prices there are signs that deliveries are easing, production in France (EU’s second largest producer) fell by 1% in March. 

However, it seems commodity prices will remain under pressure for a while yet.  As reported previously, EU intervention stores of SMP are nearly full and plenty is still being produced; this will all have to come to the market at some point.  Domestic milk price announcements still remain negative, although Glanbia has reduced its cut of 2ppl from 1^st May to 1.5ppl, with seasonality capped at 4.2ppl (from 6.3ppl).