Early signs of a slowdown in milk supply growth in the United States and Europe could lead to a recovery in milk prices later this year.Joe Collins, MD Trading and Ingredients with Ornua (formerly the Irish Dairy Board), said that in recent days, markets appear to have stabilised although buying activity is light. “Milk output in the EU is expected to be down 1.8% in quarter one, as lower milk prices and super levy concerns combined to reduce supplies,” he said.
Early signs of a slowdown in milk supply growth in the United States and Europe could lead to a recovery in milk prices later this year.
Joe Collins, MD Trading and Ingredients with Ornua (formerly the Irish Dairy Board), said that in recent days, markets appear to have stabilised although buying activity is light. “Milk output in the EU is expected to be down 1.8% in quarter one, as lower milk prices and super levy concerns combined to reduce supplies,” he said.
On Wednesday, the USDA reported that March milk supply was up a modest 1.1%, as drought in California, increased culling (+2.9% year on year) and slower yield growth per cow impacted. This is the slowest growth in milk output in 12 months, and below the estimated annual increase in domestic consumption of 1.5%.
Early data for April indicates that post-quota output in France and Germany, two key supply countries, continues below previous year levels, with flows down 5% and 2.8% respectively. These two countries account for up to 40% of total EU supplies.
Output is reported to be higher in the Netherlands and Ireland, but not as strong as had been anticipated.
“This would indicate that milk pricing and farm profitability have replaced quota as the key factors restraining output,” Collins said. “Current market returns for dairy products indicate that both processors and farmers are subsidising milk prices at present,” he added.
Joe Collins said that the ECB’s Quantitative-Easing policy, low interest rates, low oil prices and favourable exchange rates will help drive GDP growth in both the EU and US, which in turn should drive increases in dairy consumption in these key markets, especially for cheese and butter.
“With these supply and demand factors combining, indications are that dairy market stabilisation should be supported, with prices potentially firming in coming months,” he said.
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