New Zealand milk production will increase by 12% next year as global supplies bounce back strongly, according to the latest forecast from Rabobank.
While Kiwi farmers will lead the charge on increased dairy output, the Dutch lender predicted that other southern hemisphere countries would also experience sizeable growth. Milk supplies in Argentina, Brazil and Australia are to expand by 5percent, 3 percent and 1 percent respectively.
However, the sharp increase in New Zealand output will attract most attention. The forecast growth will come off a low base given that the past 12 months have been extremely difficult for the Australasian dairy powerhouse. A severe drought hit milk output across both the North and South Island, forcing farmers to dry off herds early due to a shortage of grass.
A sizeable lift in output will have obvious implications for milk prices, since the global dairy price rally of the last few months has been driven by lower supplies.
According to Peter Duggan of Bord Bia, the strongest source of international buying in the first half of this year came from China and Russia.
"In the first four months of 2013, Chinese imports grew by 27 percentin milk equivalent terms, which reflected a harsh winter, changes to subsidy rules, phasing out of small farms and market shortfalls," Mr Duggan said.
"In Russia, imports during the first four months were 82 percent higher for butter, 15 percent higher for cheese and 10 percent higher for powder as a harsh winter and higher feed costs affected output," he added.
Mr Duggan pointed out that while milk supplies were expected to grow over the coming 12 months, the drawdown in stocks over the last year is expected to leave export surpluses just 2 percent higher in early 2014 compared to 2012.
"This is hardly enough to keep up with the long term growth in demand across deficit regions," he maintained.
Meanwhile, milk supplies here at home continue to improve. Accurate figures to the end of June are not yet available for Dairygold but the co-op expects to be on quota by the end of July.
Glanbia Ingredients Ireland (GII) is 0.5 percent or 1.7m liters over quota for June. The company reports very strong supplies during June, with deliveries running 7 percent up on 2012. In contrast, Kerry Group was 20m liters, or 5percent, under quota at the end of June.