INSIGHT
UPFRONT MARKET VIEW
Watch and wait on world dairy Words by: Stuart Davison
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EU-27 milk production ('000t)
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ew season milk is flowing in New Zealand, calving is almost 2019 2020 done and before you know it, 13,650 mating will be top of the order. While farmers are flat out getting 13,150 milk flowing, the rest of the global dairy industry spends the time from August 12,650 through September trying to determine what global milk production is likely to be. 12,150 It is a tough time to get a gauge on which way the balance is leaning. 11,650 There’s not enough data on milk production out of New Zealand, on the 11,150 way towards peak production, to lodge a safe bet. 10,650 This at the same time that the European Union comes down from its peak, with hard data slow to appear, shaping the other side of the supply story. In the current market, the United States and Argentina must also be looked into. US farmers have lifted milk production This year, EU milk production at the same time as US demand fell will not grow to the scale of substantially, so US processors earlier estimates, with hot and have been forced to explore dry weather impacting milk new export avenues over flows, especially in France and the last year. This has been Germany. mostly SMP in greater Milk production is expected quantities into SouthEast Asia, to run behind last year’s figures among others, and whey into Stuart Davison China. on the way to Christmas, which is already being felt in skim milk Fortunately for NZ, Mexico’s powder (SMP) prices. demand for SMP has returned from the Even with the larger EU milk-producing doldrums of the Covid-impacted demand countries seeing production slowing, other lows, which managed to return US SMP EU countries are going hell for leather, and exports to their normal destination, pushing as much milk into the market as Mexico, allowing NZ to keep SouthEast possible. Asian customers. Ireland, Poland and Italy continue to China’s demand for protein has also kept post positive milk production figures. US whey in check, helping to balance out However, most likely not enough to make some of their production. up for the lag coming from French and US milk production continues to grow, German dairies. now with two years of consistent growth. US milk production has typically tended July’s figure was one of the slowest at 2% to be consumed internally, or pushed over growth, year on year. As with the rest of their northern and southern borders into the world, the US dairy industry seems to Canada and Mexico, rather than further be in a holding pattern, waiting for some afield. Covid upset this to a point. indication of the direction of milk prices
and thus production for the rest of the year. Argentina’s seasons are the same as NZ, pasture-based, and heavily impacted by weather and costs, but more importantly, world prices. Argentina’s exports have exploded over the last two years. Whole milk powder exports out of Argentina continue to grow, seemingly finding milk in every nook and crevice of the country. The question that poses itself this season is, can Argentina find more milk to process into whole milk powder? So, we wait and watch weather and export figures from Argentina. Once the market starts to get a feel for expected milk production out of these key milk producing regions, prices begin to stabilise. It usually ends up in calm continuation knowing that supply will meet demand, or hectic buying. The point that the market makes its mind up is generally at the end of September. It will be exciting as always. • Stuart Davison is an NZX Dairy Analyst.
Dairy Exporter | www.nzfarmlife.co.nz | September 2021
