The Outlook blog

What we're seeing - 29 November 2017

This week, the focus is still on supply dynamics and what they will mean in terms of commodity prices. In the EU, the tide of milk growth is continuing to vex policy makers and processors alike. The EU Commission closed its tender for SMP intervention stocks last week – and while the 33,000t offering attracted bids between €800/t and €1,390/t – a grand total of 40t was actually sold.

With the close to 400,000t in stores not going anywhere, and milk expected to grow in 2018 the EU Commission is clearly worried about the prospect of more intervention purchases from March next year.

A formal proposal has come from the Commission to set the limit at which public intervention takes place at fixed price in 2018 to zero. This would lead to a tendering procedure opening from the 1st March next year where the Commission, with a vote at the Committee for the Common Organisation of the Agricultural Markets, would decide on a case-by-case basis what volumes should be bought-in and at what price.

Such purchases according to the Commission, would “drift away” from the objective of ensuring a fair standard of living for the agricultural community, given farmgate prices are expected to remain at “satisfactory levels”. The Commission appears confident that, if this proposal is passed, cheese will support EU farmgate prices, despite the effective removal of the SMP safety net.

Chart of the week

Dairy Australia reports October milk production rose 6.7% YOY, although it was still 5.3% behind the same month in 2015. Season-to-date milk production is 2.7% ahead of last year.

Milk production in the southern exporting region increased 8.9% YOY, as Tasmanian production was 12.4% higher YOY and South Australia’s output rose 11.1% YOY. Victorian milk production across Victoria lifted 8.2% in October. Production in all Victorian regions was ahead in October, up 11.9% YOY in Northern Victoria, 8.6% YOY in Gippsland and 4.8% YOY in Western Victoria. In Queensland and NSW, milk production fell 6.7% and 3%, respectively. Western Australia’s milk output was up 1.2% for October.

This is our take on what’s happening in Australian, New Zealand and global dairy markets based on our weekly Dairyglobe newsletter. Interested in subscribing to the Dairyglobe? Contact our office on info@freshagenda.com.au or +613 8414 0904 or read more here!

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