Price should affect global production of milk in the first semester of 2016

After a third quarter with an overall production of milk above what the market needed — which led to the formation of significant stocks in the hands of buyers and sellers, the rebalancing of the foundations for the new crop of milk is close to occur, says Rabobank's quarterly report released today.
The analysis of the Dutch Bank, prices are extremely low in New Zealand and will be "more uncomfortable" in many regions in the coming months. In this scenario, the expected drop in production in the exporting regions of milk in the spring of 2016, pulled by "strong reductions" in New Zealand, "modest contractions" in Latin America and stabilization of production in the European Union, according to Rabobank.
Coupled with modest growth in consumption within the exporting regions, lower production should reduce exportable surpluses of the new crop of milk at 7% in the first half of next year, says the Bank. This will lead to any adjustment in the market during this period "changing market sentiment", the report says.
At the same time, says the Bank, low prices and some improvement in income growth should promote an increase in purchases in deficit regions.
But the Bank recognizes that there are two exceptions: Russia must keep off the market and imports from China should stabilize in the first half of 2016 — and not grow.
In this scenario, the dairy stocks will gradually decrease during the first half of 2016 and should get back to normal in mid-year, according to Rabobank.
Thus, the report estimates, the price pressure will grow as the first semester progresses — of modest from the end of the first quarter of 2016 to significant at the end of the second quarter.
However, says the Dutch Bank, the ceiling prices in 12 months to this recovery will be limited by the strengthening of the dollar, by less prominent role of China in direct market adjustment and the consequent dependence of other marginal buyers, for whom the price of around $ 3,400 per tonne (milk powder) will show probably "inaccessible".
The report points that can be intense upward influences and bass players in the dairy market. Between the intense upward indicates that the strong El Niño increases the risk of adverse weather in major milk producing regions — for example, drought in southeastern Australia, excess rain in northern Argentina. Particularly because prices in some regions are not steady enough to justify increased investment in food supplementation of dairy cows if the grass dry.
Among bassists, the bank notes that the end of the regime of milk production quotas of the European Union — combined with the strong devaluation of the euro — can lead to increased growth of surpluses in the EU than anticipated today (over 800 million liters in the next 12 months). In addition, the global economic scenario, the potential impacts of more volatility in the financial market and a stumble from China to rebalance its economy are also risk factors, according to the Bank