ICOS says Irish dairy industry may have "dodged a bullet"

Sources in ICOS suggest that the dairy industry may have “dodged a bullet”, with Eurex butter and skim milk powder quotes having risen by 10.3% and 11.3% respectively in the past month.

According to the co-ops organisation, dairy markets are still quite weak, with price quotes still a long way off the highs of 2013 and early 2014 — but there has been a significant tightening of markets.

The €3,057 quoted for butter and €1,990 for SMP value the milk equivalent at only 24.7c per litre, plus VAT. But that’s 3c up from last month.

According to ICOS, strengthening European sentiment is influenced by the expected impact of low milk prices and dry weather on New Zealand milk supplies, which is reflected in Fonterra’s GDT auction results strengthening 20% since mid-December.

ICOS market analysts say prolonged dry weather, dwindling grass, high beef prices, and poor milk prices suggest that culling is a more attractive option for New Zealand dairy farmers.

“It must be remembered that US milk production is still growing by over 3% per annum, and that we are about to see a milk supply surge post April,” said ICOS sources.

“Also, we still have the Russian embargo, and the Chinese don’t seem to have gotten back into buying powder.

“Therefore, we need to take a balanced view on market prospects, but as of now, it would appear that we, luckily, hit the worst of the bear market just as we were out of production, and we may see somewhat stronger markets as we come back into supply.”