image expired

Dairy analyst Susan Kilby told Radio New Zealand that essentially there is too much milk around. The high prices a couple of years ago encouraged an increase in production across the globe but this coupled with a drop in demand from the key buyers like China and Russia’s ban on US and European food imports has led to a glut on the market. Kilby foresees a further price reduction as the main players adjust to this flooded market. Fonterra, New Zealand’s milk cooperative, is forecasting a payout of NZ$ 5.25/kg milk solids but analysts expect this to drop when the board meet on Friday. 

World trade of dairy products has taken a hit in 2015 with China reducing its demand for whole milk powder by 54% compared to 2014 and demand for butter down 40%, according to statics produced by the Milk Marketing Observatory. Russia’s demand for butter and oil has dropped 64% from 54K tonnes to just over 19K tonnes. 

Meanwhile the Reserve Bank of New Zealand, the country’s central bank, has flagged the dairy sector as a major risk to financial stability, reports the Wall Street Journal. How long before UK banks take the same stance with dairy farms here?