Milk production in Australia remains in a late seasonal month by month period of slight fluctuation. In most years, production begins to trend up in July.
The structure of the dairy processing industry in Australia remains in a state of evolution. A dairy firm based in Canada is closer to finalizing the purchase of an Australian cheese brand and plants. This possible ownership transfer occurs against the backdrop of recent concerns about the surplus dairy processing capacity in Australia.
Varied factors are contributing to excess capacity and the resulting lower dairy processing margins. Among these factors are dairy producers exiting the business, smaller herd sizes, and lower producer investments in operations. The last relates to lower profitability as well as tighter credit availability. Some analysts are not terribly optimistic that producer margins will improve much in coming months. If so, that will be a negative factor impacting Australian milk production in the early stages of the next milk production season.
New Zealand milk production remains in a typical somewhat steep month to month trend down toward the low point during June-July. In most years, milk production begins a sharp upward trend after that. New Zealand must export a significant part of annual milk production. Thus, developments in other traditional export destinations are always matters of importance in looking forward.
Slowing economic growth in China has been said to be causing gloomier demand factors. For example, expanding swine flu in China may result in a far lower pig population. China buys significant amounts of whey from New Zealand, partly to feed the pigs. Substantially lower numbers of Chinese pigs needing to be fed will lead to less need for whey from New Zealand.
Lower demand from China may also impact WMP sales by New Zealand, usually the largest supplier of WMP to China. Almost 90 percent of Chinaśs WMP imports in 2018 came from New Zealand and more than 37 percent of New Zealand exports went to China, according to Eucolait. In this case, any significant slowing of recent dairy buying patterns by China will ripple back to New Zealand processors and ultimately impact producer prices. Weaker demand could lead to lower milk pay prices in the coming season.
Information for the period April 29 - May 10, 2019, issued biweekly
Dairy Market News - Madison, WI
Eric Graf, 608.422.8590
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