Global demand soft but steady

With quiet demand placing pressure on commodity prices, and therefore farm gate milk prices offered within these exporting regions, the key driver that is common between all is favourable weather.

For the US, mild winter temperatures have supported many dairying regions during the past six months in addition to continuing production growth driven by a growing national herd and higher milk yields per cow.

Supportive conditions through to spring in most producing regions have kept milk production tracking along steadily despite expectations of typical seasonal declines.

With consecutive production growth continuing into March, recording an overall increase of 0.6 per cent year-on-year.

Almost all major producing states continue to record positive monthly production figures, offsetting the declines faced in the largest, California, where many farmers are dealing with flooding impacts.

From an exporting perspective, suppressed domestic demand has further contributed to increased exportable supply.

In a similar manner, many regions across Europe experienced milder-than-usual conditions over their winter, allowing for pasture growth and improved feed availability to support cows and boost milk flows during a time that it typically dips.

European milk production began to show growth from October last year, this since having continued through the spring flush, with another 0.8 per cent increase across February.

In the United Kingdom, this positive production response from the end of last year, was helped in part by the incentive of high farm gate milk prices.

Although favourable weather conditions throughout some regions have continued to support production increases, other areas continue to battle now falling farm gate milk prices and other incentives or restrictions to reduce emissions or stop producing all together.

Milk production has also grown in New Zealand in recent months, up another one per cent in March.

Many dairying regions have enjoyed a wet end to summer, with strong pasture growth and feed availability being the key drivers of this consecutive monthly growth.

According to analysts, pasture growth conditions are currently better than recent seasons and historical averages and are likely to support production through to the end of the season.

However, despite this, there are still expectations that production will end the full 2022-23 season down about 0.7 per cent.

Global demand, while it has softened, remains relatively steady, with both importers and consumers bound by affordability pressures.

China’s relative lack of demand is a key driver, with growing local milk production, increasing powder stockpiles and reduced consumer activity all contributing.

Globally, this dynamic has played out over the past few months, and with buyer sentiment and affordability still at the wheel for many, is expected to remain for some time.

While milk production continues to grow in the US, Europe, and New Zealand, and both domestic and international demand remain stagnant, this increased exportable supply is expected to lean on commodity prices for some time yet.