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12.14
08:23

Agricultural markets at the turn of the year: milk market 2015

Agricultural markets 2015: milk market in the cyclical price low

The past year of 2014 is a shaped world's sharp downturn of in milk prices by almost 50%. Strong production increases as a result of above-average prices caused in previous years. At the same time, global demand with a focus on China and Russia declined. Typical milk production and price cycle, on the world market, which is to prove for decades, confirmed in principle. In the EU this market mechanism was not in previous decades to bear, because the intervention price, as well as the quota regime offset strong volume and price fluctuations or even prevented. While the world market average of years developed expansive, an isolated EU market stagnation and stable but low prices on the protection level of €0.22 would be marked per kg.

The year 2015 holds several crucial issues for the further development for the dairy industry.

  • In 2015, will global milk production with falling milk prices and feed costs continue their growth?
  • What production dynamics developed in the EU after the quota?
  • The Chinese import demand comes back to previous growth rates again? What influence does the economic development on the demand for milk and milk products in 2015?
  • What will become of the Russian import lock?
  • How develop the milk prices by 2015?

The increased production capacity from the past are also in the years 2015 aftermath leave. According to the USDA the rate of increase should % or approximately 15 million metric tons but rd. + 4 compared to + 1.9% or + 9 million tonnes. In the EU's largest milk producing region, the USDA estimated zero growth, while the European Commission predicts a 1.5% increase or approximately 2.5 million tonnes. The United States will be in the second largest production area + 3% or approximately 3 million tonnes estimated. Lower feed prices offset part of the fallen US milk price again. India's milk production is expected to grow by around 5%, is used, but almost exclusively of self-sufficiency.  The world's largest exporter of New Zealand to increase its milk production by + 2% or approximately 0.5 million tonnes. Russia milk production will go back as its scope for decades-2%. Half of the Russian dairy herds are predominantly of self-sufficiency in little competitive small attitudes.

The previous limit of individual milk production in the EU will be early April 2015. Thus, the way could be made free to an unbridled increase in production . Such a development is likely but little. The fallen and persistently low milk prices dampen further expansion plans. The milk quota has limited the production only in a few countries. In the average of the EU-28 the quotas only to 90% have been met, in the Eastern countries partially under 80%. In this respect, the abolition of the quota will have a barely perceptible impact on the total amount of the EU. The global price and sales development took over long market leadership.

The Chinese import behavioris decisive for the global dairy market. Still at the beginning of the year the growth rates of dairy product imports amounted to 25-30%, but fell mid 2014 at or below last year's level. Sufficient inventories, a declining economy and provided limited funding has led to this development.  The political effort to build a larger own milk production, leads to subdued import purchases. With the reduction of inventories in China Chinese imports be may no longer resume to favourable economic development by 2015, with very large growth rates as in the past.

A possible lift the Russian import ban from August 2015 raises little hope on large outlets, as they existed before the lock. The low incomes and the purchasing power of the ruble decreased by 70% restricts the import possibilities for dairy products from the West to a small fraction. It already the Ukraine conflict solved ought in any time soon, crude back towards $100 per barrel increase and return the Russian currency on the previous purchasing power. Last but not least, the political will for the opening of the border behind it must be.

The prices for milk and milk products will be available in the first half of 2015 still under the pressure of high supply quantities simultaneously restrained demand . A seasonally declining production is caught in the spring and summer months in the southern hemisphere by increasing production as a result of the early summer peak period ("Willow shoots effect") in the northern hemisphere. For the second half of 2015 again new impetus for stronger can be favourable economic development from the demand side until slightly rising milk prices derive. Incalculable political decisions play a significant role for the actual market and price history.

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