There are now solid signs that milk production is slowly responding to lower prices, with the Commission presenting data at the recent meeting of the European Milk Market Observatory, attended by ICOS, whereby they predicted a modest milk supply increase of 1.4% in the EU this year. This figure takes into account a 5% predicted increase in Ireland, a 5.5% increase in the Netherlands, a 3% increase in Poland, and a 1.5% increase in Germany. These levels of growth are countered by zero growth in France and a 2% reduction in UK supplies. It should be noted that AHDB Dairy has predicted a 4% reduction in UK supplies for 2016. The same agency, however, only predicts a 1.3% milk supply increase for Ireland this year.

Meanwhile, at a global level, the FAO is forecasting 1.6% milk supply growth; consisting of US expected growth of 1.9% and New Zealand and Australia expecting to reduce supply across the calendar year by 2-5%.

This week’s Eurex butter index was up to €3160, an almost 30% increase on the March low of €2440. The SMP index has also risen, this time up 7% from the March low, currently quoted at €1733. Whilst the positive movement is to be welcomed, that SMP number still places the product in intervention territory, and the combined figures, when translated into milk prices, suggest a milk value of just over 22c per litre.

Meanwhile, the Ornua Purchase Price Index is stable; up slightly from 80.8 to 81.0. This reflects higher butter and SMP returns, but a weakening in cheese returns.