As global milk output tightens in response to low prices, poor weather and increased culling, a recovery in milk prices is becoming more apparent. That said, low feed prices, oil prices below $50 a barrel and stocks overhanging the market mean that key fundamentals in the marketplace are by in large unchanged. Uncertainty surrounding Brexit and political developments across the Atlantic must also be taken into consideration. The latest Eurex Butter index remains at record high levels at €4343, which is slightly strengthened from last month. While, the SMP index is slightly back at €2035.
In September, milk collection in Ireland fell by 3.5% compared to the same month last year, with October also expected to be down on last year. Milk output in the UK contracted by 10% in September. The Ornua PPI continues to strengthen at 95.9 from 92.2, reflecting higher returns in the month across all main products.
In New Zealand, weather will be a key determinant, with wet weather experienced recently on the North Island (2 months rainfall in 2 weeks in some parts). A drop in output prompted the recent jump in the GDT auction by 11.4%, with WMP over $3000 per tonne. The forecast is for a 2-3% drop in milk production for the coming season.
The US “All Milk” price strengthened slightly to $17.30 per 100Ibs, which equates to around 36c per litre. This emphasises the current competitiveness of US milk prices, with low feed prices and strong domestic demand. The US herd is at its highest level in 20 years (9.36 million), with milk production up 1.7% year to date. In addition, stock levels of cheese and butter are considered high.
This issue of Brexit was a key issue raised at the ICOS National Conference recently. Gerard Brickley from Bandon Co-op noted that despite the challenge and uncertainty surrounding the decision of Britain to leave the EU, it is still vitally important not to forget that Britain is still our nearest market with over 60 million people and growing and that as an industry we shouldn’t be afraid to develop this market into the future regardless of the Brexit outcome. He said that the immediate challenge was currency volatility, and that the industry needs to kept up-to-date with developments in order to make the right decisions, while a concerted effort is made by Government and Representative bodies to minimum the consequences on the dairy sector.
By Eamonn Farrell
Agri-Food Policy Executive
22 Feb 2024