ICOS attended the Economic Board meeting of the European Milk Market Observatory (EMMO) on 23 September 2015. The high level meeting in Brussels included experts from the various steps in Europe’s milk supply chain. The meeting was held against the backdrop of protests on the streets of Brussels by farm organisations and the unveiling of the €500 million support package by the European Commission.

The general consensus from the EMMO Economic Board was that it appears the bottom of the market has been reached but there is no immediate recovery in sight. Furthermore, sentiment has somewhat improved in recent weeks, although the supply/demand imbalance persists.

According to the European Commission, EU milk production will increase by 1.1% in 2015. Production is expected to continue to increase in 2016, but by no more than 0.9%. The EMMO estimates that milk production in Ireland will increase by 8% in 2015 and by an additional 5% in 2016. Production increases were registered in 19 out of 28 EU Member States following the abolition of milk quotas. Of note, production in Germany and France is expected to be slightly back this year by 0.5% in each country.

At Global level, milk production increased by 1.8 million tonnes in the first half of this year, with production increasing in the EU and the US expected to increase its production by 1.4% this year. The Commission noted that global dairy exports were decreasing, reflecting a slow-down in demand. However, EU exports of dairy products remain robust for most dairy products. It was reported that Chinese imports were back to more normal levels, prior to its import boom. Concern was raised about demand in emerging markets in the Middle East and Africa.

The EMMO has become an important tool for enhancing dairy market transparency since its inception in 2014. ICOS believes that developing a system of futures trading will be required as part of a suite of measures to help farmers to manage volatility. For this to happen in reality, a strengthened EMMO is needed with credible, accurate and timely data, as the first building blocks for appropriate hedging tools.

By Eamonn Farrell

Agri & Food Policy Executive