Milk production growth has stalled in Europe

By Jane Byrne

- Last updated on GMT

Related tags Dairy Milk New zealand Phosphate

Milk production has also pulled back in Australia, due to the effect of weather conditions on feed quantity, quality and cost, says the analysts.

Indeed, the 2018 theme of slowing Big 7 milk – in the EU, US, New Zealand, Australia, Brazil, Argentina, and Uruguay - production growth has continued to creep into the final months of the year, according to Rabobank's Dairy Quarterly Q4 2018 report.

That publication shows Q3 2018 growth sunk to just 0.8% YOY, and indicative Q4 2018 numbers show a similarly modest growth rate.

Estimated flows for the Big 7 during Q4 2018 are for just 0.6% YOY – the lowest since 2016, said the team.

And the US looks set to see the lowest year-on-year growth since 2013.

However, other regions are posting growth; New Zealand remains the star producer, concluded the dairy market specialists in the quarterly report.

Brazil moved into growth territory during Q3 2018 – a result of more moderate feed costs and profitable milk prices, they noted.

Argentina’s producers also overcame inflated milk production costs and continue to make a recovery from the low volumes delivered over the prior two years, said the team.

Modest growth predicted 

Ultimately, milk supply, however, will grow only modestly across the Big 7 over the next 12 months, forecast the analysts.

A challenging environment for expansion lies ahead, and the production squeeze will continue in 2019, driven by tight margins on farm, and the lingering effects of adverse weather, according to the review.

Though, China is expected to increase its dairy product imports by double digits in 2019. However, the uncertainty regarding economic growth remains, said the team.

Herd numbers continue to shrink 

Emma Higgins, dairy analyst with RaboResearch F&A, said:

“Herd numbers continue to shrink in Australia, Europe, and the US, either to mitigate escalating costs and/or overcome disappointing farmgate milk prices – features that will continue into H1 2019.

“Australia faces a slow recovery, with industry confidence severely knocked, while consolidation of farm numbers in the US and Argentina is also set to continue.

“The EU is finding its footing post-quota removal and drought impact, which may provide opportunity for some regions, but challenges for others – particularly farmers in the Netherlands navigating farm phosphate references.

“New Zealand dairy is facing stronger competition for other land uses, and resource constraints will provide barriers to growth across to 2020."

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