Key factors:
• The seasonal milk production growth will lag behind the rates in 2016 until mid-2017. Production in major exporters of dairy will be less than last year. The exception will be only the United States, where experts expect a further increase;
• In the domestic market of Europe is possible a slight increase in milk consumption, particularly in the cheese sector;
• Import demand for European dairy products will increase;
• Oil prices are moving on to the historically high levels and already exceed interventional mark. Thus, their further growth is possible;
• Rising prices for skimmed milk powder will be limited to intervention stocks, which were generated in previous periods;
• Milk purchasing price in the region will remain at a level that has developed in the late 2016 and is expected not to fall during the period of seasonal increase in production.
In the period from June to September 2016, compared with the previous year, milk production in the EU fell by 1.8%.
This trend is likely to continue and by the end of the fourth quarter of 2016, especially considering that all farmers have voluntarily agreed to a scheme of reducing milk production in October-December (with a partial view of this scheme and in January 2017), for which they will be paid appropriate compensation. By the way, this regimen requires the actual farmer's signature and does not include a non-alternative decrease in production volumes. In fact, the Union after the rejection of quotas returned to them only in the other, voluntary form. Farmers receive a fee for the "production discipline."
Proceeds of milk for processing in the EU in the first half of 2017 will be reduced by 2.4 million tons. In assessing the prospects for the short and medium term of the dairy market, it becomes clear that the income will be reduced to the middle of the year. Even taking into account the seasonal increase in dairy production in January-May, the volume will be 2 million tons less than in the corresponding period in 2016th. The total volume of milk entering the processing is estimated at 150.5 million tons.
At the same time, milk production in other major export regions continues to decline. In Oceania and South America, production fell due to bad weather conditions, which are expected to continue in 2017. The United States in the first half of 2017 are expected increase in dairy production. Therefore, experts expect that this will provide an opportunity to restore the balance and offset the decline in Oceania and the EU. This should take into account the growth of domestic demand in the United States that would deter export trade.
The first signals that have reported the end of the depressive period were visible in the middle of 2016 when production began to decline. Prices of cream and dry milk concentrate assumed trend growth in the oil market and skimmed milk powder. In the first half of 2017, experts expect that under constant conditions, the price of milk powder and protein products will be stable, but for butter and fat prices will rise further. In many ways, further developments will depend on the stability of the euro against the dollar. Recently, its "sagging" was on hand to exporters of milk powder. It is believed that the global market opportunities are sufficient to release the stocks of European dried milk in the warehouses that were formed in previous periods. At the same time, such measures should be done very carefully in order not to oversaturate the market.
