Global milk price rally gathers momentum
Processors under pressure to hold prices for the first time in over 12 months
The dairy price slump appears to be over - for now. Four consecutive increases in the Global Dairy Trade (GDT) auction over the last two months have resulted in a 63pc bounce in current world market prices.
The dramatic turnaround will put pressure on milk processors here to hold their prices across the board for the first time since autumn 2014 when prices paid to farmers went in to steady decline.
Lakeland Dairies and Kerry are due to announce September prices this week, with suppliers in both regions hopeful that their milk purchasers will now halt the decline in their milk receipts.
Rabobank's Kevin Bellamy said that markets were starting to see a change in "pricing direction".
"Supplies have dried up slightly, and we estimate that there could be up to 2.5bn litres less of milk traded internationally over the next 12 months," he said.
This equates to a 5pc decline in world surplus, largely driven by a fall in New Zealand and the US.
"People are talking up El Nino, but there still hasn't been any direct evidence of this causing adverse conditions at farm level," said Mr Bellamy.
"We expect a 7-10pc decrease in New Zealand output, but most of this drop is likely to come at the tail-end of the season (first quarter of 2016) when farmers have the option of culling cows and cutting out supplementary feeding. We estimate that supplementary feeding accounted for up to 10pc of the total milk supplied last year."