Reduced confidence in the dairy industry in general is resulting in much more scrutiny of all expenditure, and supplementary feed is no exception, reported authors, Susan Kilsby, agriculture economist and Sharon Zollner, chief economist NZ, at ANZ.
Pasture production has also been favorable for most of this season, which has limited incremental demand for supplementary feed, they noted.
“We may see a little more feed demand in the next few months as soils continue to dry out – providing the price of grain remains favorable for buyers, milk prices remain elevated and there is a genuine profit to be made.”
This season, a smaller area was planted in feed barley and feed wheat. This trend is expected to continue next season as growers adjust to the reduced demand for feed grains from the dairy industry.
Indeed, an abundance of feed grains in New Zealand is putting downward pressure on prices as the summer harvest kicks off. Growers have been trying to clear silos ahead of the new-season harvest but at this stage there is still grain from last season to move, said the economists.
Prices for feed grains, in general, have softened over the past few months as growers look to sell the remainder of last season’s harvest, they wrote. “Prices for all feed grains are slightly below year-ago levels."
Palm kernel (PKE) prices have firmed a little in the past month due to tighter supply in South East Asia. “Demand from end users for PKE has eased this season.”
Impact of coronavirus outbreak
Global dairy markets have softened as the uncertainties associated with the outbreak of coronavirus weighs on the market. This has put a dampener on milk prices and broader commodity prices alike, noted the publication.
The coronavirus outbreak may have a larger impact on China’s economy than the US-China trade war, but the impact is difficult to quantify at this time, said the authors. It will most certainly have a greater impact on New Zealand dairy market than the trade war did, they commented.
“Let alone accurately predicting the impact, it may be difficult to even estimate in real time exactly how demand for dairy imports is being impacted by the virus, as it is normal to see a reduction in import demand over Q1.”
