Combined year-on-year milk supply growth across the Big 7 exporters (the EU, the US, New Zealand, Australia, Brazil, Argentina, and Uruguay) slowed during Q3 2018, as can be read in the latest RaboResearch dairy report “Dairy Quarterly Q3 2018: Step by Step”.
Lower milk production from drought-impacted areas in the northern hemisphere is at odds with a strong start to the New Zealand milk production season. Global dairy commodity markets are mixed, with variable results across regions and products. Most Oceania-origin products have lost ground as buyers keenly await the full extent of the favourable New Zealand spring flush, creating a lack of buyer urgency.
With globally-rising forage costs, farmgate milk prices will need to move higher to offset the cost impact and improve farmer margins in order to support milk production growth.
Chinese dairy product imports are expected to increase in 2H 2018, which will help absorb some of the milk supply growth from New Zealand. The full extent of the trade war fall in terms of trade and currency impacts is likely to play out in 2019 and beyond. A key risk is the strong US dollar, which will reduce the purchasing power of key importing regions.