Rabobank flags rising global dairy prices, warns of downside risks ahead
While global dairy commodity prices continue to climb in most key exporting countries, the second half of the year is expected to bring increased downside risks.
Last night’s Global Dairy Trade (GDT) auction saw the price index rise 1.7%.
Whole milk powder price rose 0.3% to US$2674/metric tonne.
However, Rabobank has downgraded its 2018-19 full-year forecast by 40c/kgMS.
Rabobank analyst Emma Higgins says while December GDT events have seen marginally better prices, the run of falls across earlier months, combined with the recent uptick in the New Zealand dollar, has fed into the bank’s downward revision; $6.65/kgMS to $6.25/kgMS.
Despite a continued slow-down in milk supply growth across the “Big 7” dairy exporting regions in the final quarter of 2018, exceptionally strong New Zealand milk production in recent months has seen Oceania commodity prices drift lower.
She says milk supply growth across the Big 7 (the EU, the US, New Zealand, Australia, Uruguay, Argentina & Brazil) sunk to 0.8% year-on-year in quarter three and indicative quarter four numbers show a similar modest growth rate.
The minimal growth rate was largely a result of lower production in Australia, the EU and the US.
“The lingering effects from mother nature have severely impacted Australian milk flows and stalled European growth with feed quality and quantity impacted across the second half of 2018. The US also looks set to see the lowest year-on-year milk production growth since 2013, due largely to tightening margins,” Higgins said.
Key results
AMF index up 4.0%, average price US$4,936/MT
Butter index up 4.9%, average price US$3,928/MT
BMP not offered
Ched index up 2.2%, average price US$3,263/MT
LAC index up 1.6%, average price US$935/MT
RenCas index down 2.1%, average price US$5,056/MT
SMP index up 3.4%, average price US$2,042/MT
SWP index not available, average price not available
WMP index up 0.3%, average price US$2,674/MT
