It is very difficult to predict future farm-gate milk price, as long-term price predictions are often inaccurate, according to Piet Boer.
Speaking at the Positive Farmer’s Conference in Co. Cork recently, the Chairman of FrieslandCampina said that making predictions on milk price is difficult due to market influences.
“Trying to make a prediction on the world market price is a tough job. There are so many influences, such as the climate and political disturbances.
“These two factors are the main drivers of world dairy market prices.”
He said that milk price can be accurately predicted for up to three months, but after this period the accuracy of the prediction drops.
We can predict the milk price for three months in advance. After six-to-seven months the accuracy of this prediction drops. After a year, there is too much uncertainty to give a full insight.
He said that world market price volatility is the new reality for dairy production and this volatility looks set to stay.
Dairy farms across New Zealand, the US and Europe must adapt to this volatility to meet the world market price, he said.
“New Zealand is the world’s biggest surplus dairy supplier followed by the EU. Europe is currently in growth mode and it is supplying more milk to the world market.”
However, he said that dairy farmers in Europe need to receive a higher milk price than their counterparts in New Zealand, due to the varying nature of the two production systems.
Farmers in Europe will need a better milk price than farmers in New Zealand to maintain profit on farms.
The future of milk production
Dairy farmers face three major challenges in the future, he said. These challenges are a growing world population, aging farmers and the scarcity of natural raw materials.
The scope of dairy farming must change, he said, giving priority to the safety and quality of dairy products produced.
He said that one of the major obstacles facing dairy farmers is sustainability.
Boer also said that oil price could have an impact on the world dairy prices, as a low oil price hurts the consumers incomes in the countries which produce oil, especially in the middle East.
However, despite all of these challenges, he said that there is still a positive future for dairy farmers as demand worldwide dairy demand looks set to increase by 2% in the coming years.