New Zealand's dairy industry wants to hold out – the cyclical upturn is determined

New Zealand's dairy industry is willing to endure the milk price Valley

The decline in milk prices has hit the New Zealand dairy industry particularly hard. In any milk production area in the world, the prices have dropped as low as on the twin island. New Zealand's dairy industry is comparatively small with 20 million tonnes, when competition from the EU and 160 million tonnes and United States with 90 million tons, however. 

But New Zealand exports 95% of its milk production in the form of dairy products such as milk powder, butter and cheese, as well as a number of milk specialities. Adding the total export quantities, New Zealand is at the forefront of world trade and only then are the EU and the United States.

A collapse in world trade meets New Zealand naturally particularly hard and intensely among others also for this reason, because the paragraph has been to China in the form of milk powder in the foreground. A halving of Chinese imports is difficult to cope with.

Actually the prices for New Zealand dairy products in comparison with its main competitors, United States and EU are depending on the product by 10 to 30% lower. In the case of milk powder products, the differences are still very small, in the case of butter, the differences go beyond staged over 50%. The margins of the New Zealand market, its pronounced adaptation to the necessary structures of Chinese milk powder imports and the mini domestic market make the country highly vulnerable to international demand slumps. First Russia caused a demand stop, came after China and the global milk production is at a cyclical peak and is only slowly.   

NZ dairy prices should the season started July 15 equivalent drop to less than €20-ct / kg. The prices paid are closely based on the dairy ingredients (solids). Even with almost exclusively basic feed usage in the form of grazing without canned animal feed such as silage, hay or feed, such a milk price quickly reaches the limit of profitability. Also missing building costs, with the exception of the milking stand no longer range, to speak of sufficient profits.

However, it is convinced that the Valley of price for milk is overcome again. Finally are known cyclical price movements in the milk market at the international level for decades. Prices like this occurred even in previous years and were overcome after a short time again. Possibly the current price low takes slightly longer than in previous phases of the cycle, but of assessing a rising global demand for dairy products has is little changed.  

Therefore one assumes with confidence that mid-2016 bwarhorses to assume a significantly higher price level than the current is. In the medium term is a whole milk powder prices between 3,000 to $4,000 per t expected.  At the last GDT auction was still a price of $1,856 achieved per t. Yet a wide range is to the target average price expectations.

However, experience from previous years teaches that milk prices within rapidly can go from just a few months. That was the case, always, if the storage warehouses by missing replenishment were almost emptied. An El Niño weather in Australia and New Zealand with similarly missing rainfall could lead relatively quickly to such a development. However, it remains crucial that the demand for China again established itself at a higher level. Shrinking supplies of Chinese milk powder, a low price level and a world's stagnant milk production had the potential of a very quick price recovery. But: still too many "If"

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