Milk production down, costs up and milk prices up

The final 2010/11 milk price is a long way away from being finalised but it is interesting to have an insight into the drivers of production and international prices.

The first thing to note is that dairy production volumes are falling in the Northern Hemisphere and stocks are quite tight.  This is reflected by USA commodity futures which are higher for September than for any time this year.

On the other hand, the seasonal effect on costs, plus perhaps an uptick due to reductions in Northern Hemisphere grain stocks have resulted in higher costs of production and lower margins in the influential Californian region.

So perhaps a rising Global dairy trade week after next?