Tuesday, 08 February 2022 13:55

Demand up, supply down

Written by  Sudesh Kissun
Synlait chief executive Grant Watson. Synlait chief executive Grant Watson.

Synlait's new chief executive Grant Watson says dairy commodity prices have strengthened significantly as strong global demand hs outrun restricted supply.

"As seen in most commodities, Covid-19 is having a significant impact as illness and lockdowns impact production and supply chains," says Watson, who joined Synlait from Taupo-based Miraka.

"This has been amplified by rising production costs, driven by strong inflation and ongoing pressure on our industry to decarbonise.

"The New Zealand milk price is also benefitting from a weakening New Zealand dollar against the US dollar."

Watson expects the ongoing demand for dairy products to keep prices high for some time.

Fonterra chief executive Miles Hurrell says there is consistent demand for dairy at a time of constrained global milk supply.

"In general, demand globally remains strong - although, we are seeing this vary across our geographic spread," says Hurrell.

Overall, global milk supply growth is forecast to track below average levels, with European milk production growth down on last year and US milk growth slowing due to high feed costs.

New Zealand milk supply is also constrained due to varied weather and challenging growing conditions.

Last month Fonterra reduced its forecast milk collections for 2021-22 from 1,525 million kgMS to 1,500 million kgMS.

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