Disappointing growth in dairy
21:34 (GMT+2), Thu , 07 August 2014
Larry Bentley

MILK production during the first six months of 2014 is 0.04% lower than during the same period in 2013.

The producer price increases announced since January may not result in increased production before spring.

Lower grain prices will provide some relief for milk producers.

Total imports during January to May 2014 are 16.7% higher than last year, with exports marginally higher.

In most cases products are imported at prices substantially above the local ex-factory prices.

International dairy product prices increased steeply during 2013 and at the beginning of 2014.

Since then, prices decreased during 14 subsequent Fonterra Global Dairy Trade sales.

At the second June sale, prices were 34% lower than at the December 2013 sale.

Global prices are still substantially higher than at the beginning of 2013, especially in Rand terms.

Producer price increases for the 2013/14 season were announced by milk processors in major dairy countries such as New Zealand, Australia and Europe.

Producer prices in major exporting countries are higher than in South Africa.

Fonterra announced an expected pay-out of NZ$ 8.65 per kilogram of solids for the 2013/14 season, equivalent to R5.30 per litre for South Africa’s average composition.

Global economy

The global dairy index is currently at 961, 2.4% lower than at the beginning of 2013.

The global economy is growing, albeit with some uncertainty and with stronger growth in developed than in developing countries.

South African economic growth disappointed in the  rst quarter of 2014.

The International Monetary Fund (IMF) predicts improved growth in developing and developed countries.

Fiscal imbalances between developed and developing countries, in particular oil exporting countries, combined with renewed global political uncertainty resulted in higher downside risk to economic growth.

Despite negative sentiment, South African consumers’ debt has decreased while disposable income grew by 5%.

Slow economic growth during the third quarter of 2013 was followed by improved growth in the last quarter.

Negative economic growth in the  rst quarter of 2014, renewed fears of a recession.

Positive general retail sales growth did result in higher dairy product sales at more favourable retail prices during 2013.

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