Rabobank: China's Import Program, Weather-impacted NZ Season Perfect Ingredients for Short-term Rally

NEW ZEALAND - A robust import programme by Chinese buyers, combined with a weather-impacted New Zealand season, were the perfect ingredients for the short-term rally in Q1 2018.

10 April 2018

2 minute read

Oceania

In the background, the export engine is firing on most other cylinders, as production growth expanded across all other regions, according to the latest RaboResearch report Dairy Quarterly Q1 2018: Turn the Pressure Down.

The export engine has been running on most cylinders since mid-2017. However, weather risks have now been extended beyond New Zealand. Europe battled a cold front, Australia had localised bushfires, and there are drought conditions at play in Argentina.

“The peak period of milk production in the Northern Hemisphere still looms as a pressure point for the global market in Q2 2018,” according to Emma Higgins, Analyst – Dairy. “However, Rabobank does not see the Northern Hemisphere peak milk flows completely overwhelming the global market. EU milk production growth started 2018 on a high note, but is also expected to trend lower throughout the year.”

New Zealand

This summer has been one of the more challenging ones for many New Zealand dairy farmers with drought conditions across key dairying regions impacting soil moisture and contributing to a 5.4 per cent fall in milk production across the summer period (Dec-Feb).

During February, two ex-Tropical cyclones caused disruptions for some dairy farmers, but delivered high rainfall. By mid-March soil moisture levels had been restored to the point where some regions are wetter than normal.

Milk production is winding down quickly and will be unable to make up lost ground. As a result, Rabobank expects monthly milk production volumes to trail year on year comparisons for the remainder of the season finishing down 1 per cent for the full season.