Milk production growth continues to slow

Published 9 October 18

According to Rabobank’s latest report, milk production growth continued to slow in quarter three of 2018 as a result of the dry weather in the EU and Australia. The expectation is that milk supply growth is likely to slow further during the coming 12 months in the absence of higher farmgate prices to offset tightening farmer margins.

The adverse weather conditions have had a detrimental effect on feed availability, resulting in globally rising forage costs moving forwards. The shrinking national dairy herd in Australia, EU and the US, as a result of producers scrambling to manage costs, highlights the immediate impact of the drought. The longer term impact of the drought, however, won’t be fully realised until much later in the season. The knock-on impact on the quantity and quality of silage stocks, feed costs, milk quality and cow fertility is likely to be longer-lasting.

Contrary to trends elsewhere, the near perfect weather in New Zealand has driven a strong start to the country’s milk production season (up 5% year-on-year), creating a lack of buyer urgency for most Oceania-origin products. However, an anticipated uplift in imports from China may help absorb some of this milk supply growth from New Zealand in the coming months.