Dairy Quarterly Q4 2018: Uncertainty Abounds

The 2018 theme of slowing Big 7 milk production growth has continued to creep into the final months of the year, according to Rabobank's Dairy Quarterly Q4 2018 report.

 Q3 2018 growth sunk to just 0.8% YOY, and indicative Q4 2018 numbers show a similarly modest growth rate. 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 looks set to see the lowest year-on-year growth since 2013.

Yet other areas of the dairy-exporting globe are testing this trend. Brazil moved into growth territory during

Q3 2018 – a result of more moderate feed costs and profitable milk prices. Argentine producers have overcome inflated milk production costs and continue to make a recovery from the low volumes delivered over the prior two years. But the star performer remains New Zealand, setting a new record for peak milk flows in the month of October. Still, estimated flows for the Big 7 during Q4 2018 are for just 0.6% YOY – the lowest since 2016.

According to Emma Higgins, Dairy Analyst with RaboResearch F&A: "A challenging environment for expansion lies ahead. Herd numbers continue to shrink in Australia, Europe, and the US, either to mitigate escalating costs and/or overcome disappointing farmgate milk prices – features that will continue into 1H 2019. Australia faces a slow recovery, with industry confidence severely knocked, while consolidation of farm numbers in the US and Argentina is also set to continue. The EU is finding its footing post-quota removal and drought impact, which may provide opportunity for some regions, but challenges for others – particularly farmers in the Netherlands navigating farm phosphate references. New Zealand dairy is facing stronger competition for other land uses, and resource constraints will provide barriers to growth across to 2020."

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