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Argentina Spared From Milk Price Cuts

03 October 2014

ARGENTINA - The dairy price downturn has followed a trend of more milk and less demand across the major milk producing nations, except in Argentina where yields have fallen.

Argentinian farmers have suffered heavy rains this year, seeing milk production drop two per cent nationally.

Meanwhile, farmgate milk prices are 47 per cent above year ago levels, as Fonterra, Arla, Müller and others slash prices.

The US is another market where milk prices have shown resilience.

This contrast was highlighted by dairy market analysts this week at Rabobank, explaining higher price on economic turmoil.

They linked higher milk prices to high inflation - at 40 per cent - and a depreciating interest rate.

But production, which has recovered through late summer, could be spurred by an ‘extremely favourable’ milk to feed price ratio.

“We expect production to recover in the coming months,” Rabobank said in its quarterly dairy report.

However, this will only happen if conditions improve and local prices stay strong, Rabobank added.

The report, released this week, has been accompanied by signs of frustration among UK producer group Farmers for Action (FFA) which rallied farmers, threatening processors with blockades.

A summer of discontent has seen Fonterra revise its forecast pay-out and a stream of negative results on the Global Dairy Trade, compounded this week by lower prices on all products offered on Wednesday’s auction, including a ten per cent fall in Whole Milk Powder.

Farmer organisations have received criticism after bullish forecasts for global dairy growth have set dairies into a gearing up stage for producing more milk for an expanding world market.

In Europe, the advent of quota removal, set for next year, has resulted in Irish herd expansion.

Ireland joins Germany, the Netherlands, Poland, Denmark, Austria, Cyprus and Luxembourg this year in paying superlevies worth a combined €409 million for exceeding European Union quota.

Total European production finished 4.6 per cent below quota, whereas 2012/13 saw overproduction of six per cent.

Despite lower dairy prices, farm leaders have confirmed that milk consumption will grow at two per cent annually over the coming years, a figure reaffirmed by a leading food processor and packager this week.

Swedish company Tetra Pak pinned 1.8 per cent to the compound increase expected next year and in 2016 in its latest Dairy Index publication.

Greater still is the portion of milk to be traded.

Milk powder processing will grow by five per cent each year until 2020, Tetra Pak said, turning the powder sector from a €551 million to a €740 million industry.

Michael Priestley

Michael Priestley
News Team - Editor

Mainly production and market stories on ruminants sector. Works closely with sustainability consultants at FAI Farms


Top image via Shutterstock

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