Milk markets remain under pressure

Talk of milk supply control returning in the EU didn’t boost the GlobalDairyTrade commodity auction on Tuesday, with a 2.9% slump to a seven-month low, defying signals from futures markets which had predicted a positive outcome.

Milk markets remain under pressure

Strong EU and US output are still blamed primarily for the market slump.

The EU Commission has forecast EU milk output to rise 1.4% in 2016, after 2015’s 2.3% increase.

Significant increases are expected in Ireland, the Netherlands and Denmark

US output is expected by the US Department of Agriculture to rise 1.6%.

Markets are likely to remain under pressure due to combined production from the key four global exporters rising 3.5m tonnes in 2016, well ahead of forecast global import growth.

The main New Zealand dairy co-op, Fonterra, blamed ‘too much EU milk’, as it sliced another 6% off its milk price forecast, following a 10% cut just six weeks ago.

However, the EU Commission refutes that, pointing out that US milk production rose by 12%, and New Zealand output by 36%, from 2007 to 2015, compared to an EU increase of only 10%.

The latest cut took Fonterra price forecasts to a 13-year low, which could tip most New Zealand dairy enterprises into severe loss-making situations.

In the EU, dairy commodity indices suggest milk values well below 20c per litre.

However, Irish prices remain around 25c, boosted by Ornua’s apparent significant market outperformance, and by individual co-ops subsidising dairy farmers.

The biggest milk buyer, Glanbia, will pay its suppliers 25c for February milk, inclusive of a 1 cpl Glanbia Co-op support payment (for members who signed and remain in compliance with the terms of their Milk Supply Agreement).

Lakeland and Kerry also held their price unchanged from January, but Dairygold Co-op cut their February milk price by 1.5c, to 24c.

IFA milk chairman Sean O’Leary has urged all other co-op board members setting the February milk price, to follow the examples of Lakeland, Glanbia and Kerry.

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