Commodity Milk Value Outlook

6 February 2018

Our estimate of the 2017/18 southern Australia Commodity Milk Value (CMV) has settled in a range of $5.25 to $5.35/kgms, despite the recent shredding in the weekly CMV in recent months (see above chart).

The average CMV expected in 2018/19 is expected to significantly worsen with continued weakness in commodity prices to a range of $4.30 to $4.50/kgms. The likely “value capture” achievable by companies and paid to milk producers above the underlying CMV may vary considerably. This will depend on the whether local wholesale cheese prices can withstand the expected pressure of additional EU and US supplies, and the global demand for butterfat at still elevated prices.

Milk prices offered in 2018/19 will be influenced by competition for milk as dairy companies continue to bid for milk in the post-MG era. A weaker price signal to farmers will no doubt slow milk production given the prevailing sentiment and fickle seasonal conditions expected, whereas demand for milk in domestic and export markets will continue to grow.

 

The drivers of the outlook are further explained in the attached document .

We will update this outlook in the coming months when factors sufficiently alter the outlook.