Global food inflation has now risen for 11 consecutive months. This is partly the reason for the bounce in dairy markets globally.

Retail butter and cream demand should remain strong in the near-term with the return of food service potentially creating demand spikes.

The other side of this is that supply is flat and rising feed prices are dampening any major supply spike. Rising feed prices underpin higher milk prices, as many of the big milk producing countries are producing milk from purchased feed.

Forecasts indicate global supply will rise, but much depends on the weather.

While New Zealand (NZ) dairy farmers are currently on holidays, the forecast price is expected to be a record for NZ dairy farmers. Unlike how we set milk prices here in Ireland, in NZ they commit in advance and leave a range rather than set milk price retrospectively.

In the US, the supply situation is bearish, with strong growth expected in May (output restrictions were implemented in April last year); though new capacity means dumping is unlikely to occur.

Despite improving milk flows, markets look positive for the remainder of the year as demand looks set to at least match or outpace supply.

As Irish milk supply moves past peak, some processors will start to look at options that allow them pick and choose a product mix rather than just avail of what processing capacity is available. This allows the best processors to target better returning products and markets that will in turn deliver a better farmgate price.

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