Don't be fooled by the quick turnaround in Class III price futures the last two months. Milk producers aren't out of the woods yet, says a Rabobank analyst.
Since bottoming out on January 14 - closing futures prices that day were $13.93 for March, $13.60 for April, and $13.98 for May - the three were $1.59, $1.78 and $1 higher last week. That's not cause for a party, but it is a relief for the time being.
According to Rabobank's Dairy Quarterly report released last week, more export uncertainty and price volatility figures to be ahead, but perhaps only for three more months.
"We have passed through the worst for dairy market fundamentals," says report author Tim Hunt, "but things [dairy export supplies] aren't likely to be as tight through the middle of the year as the market is currently factoring in."
The report predicts that global availability of dairy products will exceed demand due to continuing low levels of purchases by the two biggest buyers in the world, China and Russia.
"We expect that low prices will be required to achieve (a balancing of supply with demand) without significant stock accumulation, limiting the prospects for further price recovery in the near term. Indeed, we consider it entirely plausible that prices may see a period of softening through quarter two, as the Northern Hemisphere spring peak is reached," it said.
However, Rabobank continues to anticipate that prices will start to rise in quarter three and gain more momentum in quarter four.
(c) Hoard's Dairyman Intel 2015
March 23, 2015
