IFCN says new milk price cycle will start in 2018

By Jim Cornall contact

- Last updated on GMT

The IFCN says an increase in production will mean a new price cycle starts with a downward trend.
The IFCN says an increase in production will mean a new price cycle starts with a downward trend.

Related tags: Milk price, Milk, Inflation, Dairy farming

German dairy data company IFCN says its new data show the milk world production growth rate in 2016 was the lowest since 1997.

This low milk supply influenced the world milk price level and now the cycle from 2013-2016 has ended.

Since 2013, costs of milk production decreased from $47.2 to $38.4/100 kg milk on average for all farms analyzed.

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IFCN Combined World Milk Price Indicator. Pic: IFCN

IFCN said its latest results shows 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. 

According to IFCN, in 2018 a new cycle will start.

Increase in production

Dr Torsten Hemme, managing director of the IFCN, said, “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.”

According to Dr Amit Saha, leading farm analysis at IFCN, the decrease in production is grounded in poor farm economics due to low world milk prices and local adverse weather events.

The data indicate high variability in farmgate milk prices from $18.1 to $95.5/100 kg ECM in 2016. The average world farmgate milk price last year was $37.7/100 kg ECM (energy corrected milk) based on 124 typical farms analyzed in 52 countries.

Milk production costs drop

On the production side, IFCN said it observed 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.

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Cost of milk production in 2016 of average size typical farms in 2016. Pic: IFCN

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.

 

Related topics: Markets, Dairy Health Check, Fresh Milk

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