Skim milk powder led dairy prices at GlobalDairyTrade to a
15-month low, undermined by "intense supply competition" being fostered by
increased output in the likes of Europe and New Zealand.
The GlobalDairyTrade index of dairy prices fell by 1.8%, its
seventh successive decline, the longest since 2011, during which values have
fallen by 22%.
The latest drop, which came amid a drop in volumes to the
lowest in nearly a year, was led by skim milk powder, which dropped in value by
And it comes amid increasing evidence of farmers succeeding
in raising production in response to prices which remain elevated by historic
litres of buttermilk dumped'
In Europe, the UK, for instance, enjoyed record production last
month, and has seen May deliveries remain more than 10% higher than a year ago.
In New Zealand, collections by Fonterra, which collects the
great majority of milk in the top exporting country, have risen by 7.7% so far
in 2013-14, which ends this month, with volumes overwhelming processing
facilities at high season around October.
"So much milk was produced at the peak that Fonterra
factories couldn't cope with it all, and several million litres of buttermilk
was dumped at a couple of sites in the North Island," US Department of
Agriculture staff in Wellington said in a report published overnight.
The extra supplies have changed the dynamics of a market
marked last year by large demand, largely from Asia, and constrained
Falling skim milk powder prices reflect a "market
environment of intense supply competition from both northern and southern
hemisphere sources", industry group Dairy Australia said in a market report
'Europe is flush…'
At broker INTL FCStone's Chicago office, senior broker Dave Kurzawski
said: "Europe is flush with milk. New Zealand and Australia are flush with
"Buyers have seen that and have are not filling up so much -
they have more to choose from," meaning less urgency in securing supplies.
"The demand is there, but it is going through a slow patch
right now," with the market "more in equilibrium right now" than the deficit
situation which existed last year, Mr Kurzawski told Agrimoney.com.
GlobalDairyTrade prices appeared to be in an "orderly
decline" while it sought a level which would encourage more demand.
New Zealand plateau
The strong New Zealand production performance prompted the
USDA bureau to lift its estimate for the country's output in calendar 2013 by 522,000
tonnes to 20.2m tonnes, and raise its forecast for 2014 by 781,000 tonnes to 21.35m
"'Onward and upward' would appear to be the catchphrase for
New Zealand dairy farmers at the moment," the bureau said.
However, the 2014 upgrade disguised an expectation of year-on-year
growth petering out in the July-to-December period, with lower productivity
offsetting an increase of some 70,000 head in the New Zealand herd.
"Milk production in the second half of the year is unlikely
to exceed the volume produced during the same period in 2013," the bureau said,
citing the enthusiasm among farmers to maximise early-2014
"This means that cow condition at calving isn't likely to be
as good as in 2013" and that calving dates "will be slightly delayed in 2014,
which will result in cows having less time to get to peak production in October
and probably not hold the peak for as long".