On 23 February, the European Milk Market Observatory Economic Board meeting took place in Brussels. ICOS Agri-Food Policy Executive, Eamonn Farrell attended the meeting as part of a Copa-Cogeca delegation. The European Commission provided presentations on the milk market situation and the short term outlook, the European Dairy Association outlined the latest stock situation and Eucolait gave perspectives from the dairy trade. A brief summary of the main points outlined at the meeting include the following:

Irish and EU Milk Production

In 2015, EU milk production increased by 2.5%, an extra 3.5 million tonnes of milk. The Netherlands, Ireland, Germany and the UK contributed the most in volume terms. Irish milk production increased by 13.3% in 2015, an extra 750,000 tonnes. Greater volumes of SMP and Butter were produced instead of WMP.

EU Support Measures

Product continues to go into intervention and private storage aid, with Ireland placing 4,755t of SMP into intervention since the start of 2016. To date, there is 54,522t of SMP in intervention even before the start of peak milk production in Northern Europe. Unless, the Council of Ministers amend the quantitative limits above 109,000t, a tendering process will be automatically triggered. Concern was expressed at the meeting concerning butter prices, which remain above intervention prices but have seen declines in recent weeks.

Global Markets

Global milk production increased by 1.4% in 2015. On a positive note, this is below projections related to global demand, expected to increase by 2% year on year based on global population and demographics. However, global stocks still hang over the market. US production was strong at 1.2%, an extra 1 million tonnes, with the USDA forecasting growth of 1.6% in 2016, as feed prices remain low and weather conditions are favourable. New Zealand was back in 2015, with Fonterra now forecasting a 4% reduction in supply over the 2015/16 season. This is less than previously anticipated. China is returning to more normal levels of buying. However, low oil prices is affecting demand from emerging markets such as Algeria and Nigeria. With the Russian embargo in place, markets such as the US, Saudi Arabia and Japan became key markets for EU exports of butter and cheese.

By Eamonn Farrell

ICOS Agri & Food Policy Executive