October was a busy month for the dairy industry, reports NXZ’s Cristina Alvarado.
October has been a bustling month for the dairy industry, highlighted by our joint hosting of the SGX-NZX Global Dairy Seminar in Singapore alongside SGX. This event not only brought together many key players from the market but also allowed us to share insights and connect with current and potential customers while maintaining our usual business operations.
Throughout the month, we observed a mix of trends in milk production, trade dynamics, and Global Dairy Trade (GDT) event outcomes.
In New Zealand, milk production remains robust. September recorded a 5.2% year-on-year (YoY) increase in milk solids, aligning closely with our NZX milk production forecast of 5.4%. In terms of tonnage, this translates to a significant 4.1% YoY growth, amounting to 2.6 million tonnes – the highest figure for September since 2020.
Looking ahead, our NZX milk production predictor suggests a midpoint YoY increase of 3.6% for October, coinciding with the peak of the season. This will be followed by a tapering off, with expected increases of 2.4% in November and 1.8% in December, and declining midpoint figures starting in February 2025.
Across the globe, the United States has reported a marginal YoY increase in milk production of 0.1% for September. Australia also posted a positive figure with a 1.4% rise. In contrast, Europe is beginning to show declines, with August’s milk production down by -1.0%.
Argentina and Uruguay continue to face challenges, reporting decreases for September milk production of -1.9% and -1.0%, respectively.
The landscape of milk availability and the resulting product mix have led to constraints in key regions, particularly in Europe, where butter production has felt the pinch. These production challenges, combined with varying demand across regions, resulted in mixed outcomes at the GDT events in October.
The first event, Event 365, saw a 1.2% increase in the GDT Price Index, driven primarily by a 3.0% rise in whole milk powder (WMP) prices. However, Event 366 experienced a slight dip of -0.3%, influenced by a -1.8% decline in skim milk powder (SMP) prices.
New Zealand’s dairy exports for September showed promising YoY growth in both volumes and values, with increases of 2.7% and 12.7%, respectively. The disparity between these figures is largely due to significantly higher global dairy prices compared to last year.
Notably, anhydrous milk fat (AMF) stood out with a remarkable 37% YoY increase in export volumes. Other regions also reported strong export figures: the US saw a 3.5% increase, Europe 3.3%, and Australia 9.7% in August. Meanwhile, Argentina experienced an 8.7% rise in September exports, while China’s imports fell by -8.9%.
Despite China’s slower recovery, we are seeing a positive trend in export numbers across all key regions. The tight production environment in many areas, paired with rising demand from southeast Asia and the Middle East, bodes well for New Zealand’s dairy products as we navigate the tail end of our peak season.
The conclusion of trade negotiations between New Zealand and the United Arab Emirates (UAE) in late September, followed by agreements with the Gulf Cooperation Council (GCC) in October, is expected to enhance trade value in both directions. Notably, the GCC is New Zealand’s second-largest dairy market after China, with the UAE alone purchasing over $707 million worth of dairy products in the past 12 months (October 2023 to September 2024).
It is crucial to keep an eye on evolving factors such as avian flu and heifer availability in the US, along with the blue tongue virus and weather issues in Europe. These challenges could shape future milk supply constraints and impact dairy product availability worldwide.
While we face some global production hurdles, the overall outlook for New Zealand dairy remains strong. By leveraging trade opportunities and adapting to market demands, we can effectively navigate this dynamic landscape.
By Cristina Alvarado, commercial manager, data and insights, at NZX.
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