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World Awash With Milk, But Market Expected to Tighten

13 October 2015

GLOBAL - More milk was produced than the market needs in the third quarter of 2015, but the market may tighten in the first half of next year, analysts at Rabobank say.

Removal of milk quotas resulted in higher EU milk production in this period, which was the main driver of the faster growth in supply than growth in demand.

“Rabobank expects the market for new milk to tighten in 1H 2016, as low milk prices in New Zealand and further price falls elsewhere put the brakes on milk production, while demand rises as falling prices are passed on,” said Rabobank Global Strategist Tim Hunt.

Analysts said lower pricing will foster improved buying in deficit regions. Russia will remain out of the market because of the trade ban, and Chinese imports will only stabilise (not increase) in the first half of 2016.

The review says Rabobank expects milk stocks to normalise around mid-year in 2016, and price pressures to build through the first half of the year. 

Positive influences predicted to affect the market include the El Niño climate pattern, which could impact key production regions by drying out pasture. However, downside influences include the removal of EU quotas, euro depreciation and financial volatility including the market troubles in China.

TheCattleSite News Desk

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