The price of milk will continue to be subdued by oversupply in coming months, according to the latest research from agribusiness analysts.
Rabobank’s quarterly dairy analysis credits the “rising tide of milk” for waning sentiments in the global dairy industry.
The general trend appears to be most dairy-producing regions are currently operating at a surplus, flooding the export market with a dairy volume 3.2 billion litres higher for the six-month period ending in March 2018, compared to the same figure 12-months earlier.
“The recent growth in global milk supply, which peaked in the last quarter of 2017 with the Oceania spring peak and a return to growth in Europe, is taking its toll on global commodity prices,” Rabobank analyst Michael Harvey said in the report.
“Supply growth is emerging as the biggest risk for global dairy markets. Even butterfat prices, which had been defying gravity, have fallen in recent months.”
A combination of the global milk market, and the stronger Australian dollar, has led Rabobank to downgrade its full-year milk price for FY18 to A$5.50/kg, down 20c per kg of milk solids.
Rabobank figures Australian milk production to increase by 2.7% in the 2017/18 season.
“With most of the growth coming from the southern export regions, particularly Victoria, the good reserve of high-quality fodder, good soil moisture and high water entitlement for irrigators is boding well for a strong shoulder and solid finish to the season,” Harvey explained.
“In export markets, while demand growth is starting to moderate following a period of robust growth, dairy demand in emerging economies appears to be strong, with robust import purchasing in key deficit regions, including South-East Asia.”