IFCN says low milk production in 2016 caused 2017 price peak

Latest IFCN analysis reveals that the world production growth rate of milk in 2016 was the lowest since 1997. This low milk supply influenced the world milk price level and now the cycle of 2013-2016 has ended. In 2018 a new cycle is about to start. Since 2013, costs of milk production have also decreased from US$47.2 to $38.4/100 kg milk on average of all farms analysed.

Additionally, IFCN says that a price recovery started in mid 2016, which indicated the end of the milk price crisis. With a clear continuation of the milk price recovery, a new zig-zag scenario started in 2017.

Dr. Torsten Hemme, managing director of the IFCN, says, “After two years of crisis the milk price has recovered. But already now, we expect a new price cycle to start. Increase in production is a logical consequence and so, the price cycle will start with a downward trend.”

IFCN estimates that the world all milk production reached a level of 845 t Energy Corrected Milk (4% fat and 3.3% protein) in 2016. With an increase of 1.1% versus 2015, this is below the long term average production growth rate of 2.3% and the lowest growth rate since 1997.

Dr. Amit Saha leading farm analyst at IFCN, says, “The decrease in production is grounded in poor farm economics due to low world milk prices and local adverse weather events.”

The data indicates high variability in farm gate milk prices from US$18.1 to $95.5/100 kg ECM in 2016. The average world farm gate milk price last year was $37.7/100 kg ECM based on 124 typical farms analysed in 52 countries.

On the production side, IFCN observes a significant and continuous reduction of average milk production costs since 2013. The average costs in 2016 were $38.4/100 kg ECM, $3/100 kg ECM below the level of 2015.

The main reasons for this are farmers’ cost saving measures and currency devaluation. The lowest costs (below $30/100 kg ECM) were found in selected countries in Latin America, Africa, Central/Eastern Europe and in New Zealand.

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