For the full article see PF Olsen's Wood Matters.
"New Zealand is the only region where milk prices have fallen to extremely low levels, triggering those reductions in supply that we are looking for to rebalance this market. In Europe, the weak euro, the co-operative propping up of milk prices, and the quota systems removal, has meant that supply growth has been stronger there than it ordinarily would be."
In the US, production is still growing but only just. The milking herd declined slightly for the second straight month while prices begin to further decline. In the key state of California, production was off by 5.5 per cent compared with October last year.
Russia's ban on dairy imports from the rest of Europe had meant a lot of product was finding its way on the secondary markets of Southeast Asia, the Middle East and Africa. This, in turn, meant those regions were sitting on sizeable inventories and were less inclined to step back into the market.
But Hunt said the market's problems were cyclical and did not signify structural change.
"We believe we have seen a particularly bad cycle that is going to take at least another six months to come out of, but we don't believe we have seen a structural change in the medium term market place."
He said that as low prices found their way to the global farm gate the supply growth would be shut off. However, low prices would encourage demand and that in turn would lead to prices moving substantially up.
We still expect New Zealand to benefit from rising global trade. New Zealand may be entering a period of slower growth but the growth story is not over. This is still plenty of opportunity over the next five to 10 years.
"In the medium term, we still believe that economic growth in emerging markets will drive increased demand for dairy and will sustain a much higher trading range than we have seen."
In the US, larger scale farming has resulted in lower costs and lower feed costs have driven production higher over the past five years. He said the substantially stronger US dollar is expected to curtail US dairy exports. Dairying in New Zealand still faced a positive outlook.
"We still expect New Zealand to benefit from rising global trade. New Zealand may be entering a period of slower growth but the growth story is not over. This is still plenty of opportunity over the next five to 10 years."
source: NZ Herald
New Zealand commodity prices fell for a seventh straight month in December, with gains in log, beef and lamb prices not enough to offset weaker dairy returns, ANZ Bank’s monthly commodity price index shows.
Click on the link below to read the report from WoodWeek
Log exports contrast other commodity pricing in December
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