Rabobank dampen hopes of dairy price revival

December 23, 2015

Rabobank have dampened hopes of a dairy price revival, citing ‘strong’ European Union milk production. Forecasts do not expect whole milk powder to return to $3000 per tonne until late next year.

After seeing prices hit a 13-year low earlier in 2015, the bank says there are still signs of optimism for producers coming from overseas.

A large drawdown on stock in China, while being a major factor in the dairy downturn, has now removed around 50% of inventory from warehouses. With an annual growth rate forecast increasing from 2% in the first half of 2016 to 2.5% in the second half, Rabobank said “we continue to believe that dairy demand is picking up modestly in China”.

Furthermore, the bank remained firm on expectations of a sharp drop in milk output in New Zealand, ahead of a 6% drop expected by Fonterra. This is due, in part, from low milk prices however the continuing El Nino weather pattern looks set to extend a period of unfavourable conditions.

Despite the dairy sector woes, Craigmore have recently announced that it has raised NZ$75m for its second farmland fund, Craigmore Dairy Partnership II.

Nick Tapp, chairman of UK-based Craigmore Sustainables suggested New Zealand’s good land is a safe place to invest and gives a “big advantage in cost production” over other milk-exporting countries.

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