Current market situation

The current oversupply of milk is the result of higher production and increased imports. The total milk supply consisting of production less net exports increased by 182 million litres during the first five months of this year, compared to last year. Higher milk production contributed 117 million litres (65%) while higher imports and marginally lower exports contributed 65 million litres (35%). Imports are therefore one of the factor that have resulted in the current conditions. Positive demand growth in the year to the end of March 2015 at higher retail prices shows that the local market may be more resilient than expected. If demand continues to grow at current rates, it will contribute to a more balanced supply and demand situation in future. Production growth depends on climatic and economic factors. The announced decrease in producer prices and possible further increases in input prices will affect farmers’ future production decisions and may result in lower production.