As calving season enters into full swing across Irish dairy farms, a large degree of uncertainty remains over the market outlook in Q1 and Q2.
On the continent, Arla and FrieslandCampina have cut their farmgate milk price in February by 2c/kg and 1.75c/kg respectively. EU monthly flows are growing with a strong ending to 2017 recorded with output +3.8% in September, +4.4% in October and +6.1% in November. High milk prices and favourable weather conditions has stimulated output year on year across Europe with Germany, +6.4%; France, +5.4%; United Kingdom, +7.8%; Netherlands, +2.9%; and Italy, +5.3%.
In the US, milk production increased to 94.8 billion litres in 2017, representing a +1.4% increase year on year. Meanwhile, Irish milk collections climbed to 7.2 billion litres in 2017, a cumulative increase of 9.2% year on year. The Ornua Purchase Price Index for January is unchanged at 111.3.
The strong recovery in EU production is offset to a degree by a decline in New Zealand’s output. The most recent GDT auction is up 5.9%, with milk flows in New Zealand -2.5% in December affected by drought. Furthermore, stronger oil prices in 2018 should benefit demand, particularly in the MENA region.
Butter/SMP returns remain unfavourable versus alternatives, with SMP stocks particularly in Europe weighing heavily on the market. The EEX Index for butter is trading at €4237/tonne, an improvement on last month. The SMP Index is languishing at €1368/tonne. The recovery in EU milk collections is likely to result in extra cheese output with strong demand needed both domestically and in third country markets to maintain price stability.
18 Apr 2018
18 Apr 2018