Market fundamentals are in relatively good balance but sentiment is weakened by Brexit, geo-political uncertainty and worsening trade conflicts, according to the most recent economic board meeting of the European Milk Market Observatory.

Global milk supply has stagnated for the last nine months. EU milk collections increased marginally, +0.2% year to date. Moderate growth of 0.8% in Q3 and 1% in Q4 is forecast by the European Commission, resulting in an annual increase of +0.5% in 2019. The USDA outlook for 2019 is +0.2%. As the calving season tails off in New Zealand, weather and soil conditions are reported as good. Australian milk output is lagging due to ongoing weather and drought challenges. South America milk output has improved but is still below 2018 levels.

Market sentiment remains weak due to the ongoing Brexit crisis in the UK, geo-political factors and trade conflicts, with fears of long-term risks to the global economy.

Butter markets have stabilised with the EEX Index at €3,557/tonne. Butter production in July increased by +6% in the EU with Irish production up +18%. EU butter exports increased by 90% in July. Demand in China remains strong, especially for powders. The cheese market is stable, while the whey market is weakened due to ASF. Seasonal buying in Q4 may offer support to the market especially in more established markets.