‘Limited’ drift down in prices: Rabobank

Rabobank's Australian-based senior dairy analyst Michael Harvey is touring the North Island this week and meeting with dairy farmers to discuss what's in store for the coming months.

"Milk production will return to growth in key export regions in late 2013, as farmers in the Southern Hemisphere get a crack at farm gate milk prices 20 to 33% higher than 12 months prior, and all farmers see a substantial reduction in the cost of bought in feed," Harvey says.

"Prices are likely to drift down, as some demand is 'choked off' in emerging markets and buyers at least see a new season commencing in the Southern Hemisphere, but the shift will be limited."

Speaking at Rabobank functions in Carterton, Hamilton, Putaruru, Morrinsville, Waihi, and Whakatane this week, Harvey says weather conditions have improved markedly through March and April with virtually all key dairying regions in New Zealand experiencing good rainfall and mild temperatures.

"Production will then edge marginally above prior year levels as the season builds, with the benefits of a slightly larger herd and the ability to buy feed, offsetting mixed cow conditions and low feed reserves," he says.

"Looking at the global situation, from early 2014 we should see a stronger supply response from most major dairy exporters, and this will create bounce in export product availability and provide relief from extreme shortages."

Following his tour, Harvey will release his latest research report on the South East Asian dairy industry titled, 'Dairy – Milk for the ASEAN-6 tigers'.

The report highlights that dairy consumption growth has been outpacing local supply growth in the six ASEAN countries (Indonesia, the Philippines, Vietnam, Thailand, Singapore and Malaysia) which is creating substantial trade opportunities for dairy export countries, like New Zealand.