Dairy commodities resilient despite global economy’s deepest recession since the 1930s

Dairygold pleased farmers yesterday with a 0.5c milk price increase, “based on some cautious optimism”.

This equates to an average farm gate May milk price of 31.37c. The co-op said markets have been more positive, but it’s too soon to call it a true recovery, with Chinese demand and Brexit described as “real concerns”.

Earlier, a Glanbia Ireland fixed milk price offer of 30c from August 1 next to December 31, 2022 provided a useful indicator of reasonable prospects for dairy farmers, easing fears of a predicted three or four-year Covid-19 recession hitting prices.

It seems the pandemic holds little fear for the dairy industry, which managed to process record quantities while the disease raged.

In Glanbia’s case, employees, farmers and contractors ensured that the milk supply chain operated smoothly through a peak processing volume of a record 90 million litres per week.

Chairman Martin Keane acknowledged the great efforts made to overcome Covid-29 challenges, but said global supply and demand must be closely monitored as economies gradually re-open.

“Markets are delicately balanced at present. There has been a welcome recovery in butter and skim milk powder prices over the last month, albeit from a low base.”

Earlier this week, Kerry and Carbery also held May milk prices unchanged, providing further encouragement for IFA National Dairy Committee Chairman Tom Phelan who said Lakeland and Glanbia holding the May milk price last week stopped the slide and marked the beginning of improved returns for farmers.

On Tuesday, the Global Dairy Trade Event had a positive outcome, with product prices up 1.9%, including a 3.1% skim milk powder rise, but a 1% butter price fall.

Milk has proved to be a resilient global commodity despite what the Organisation for Economic Cooperation and Development said last week is the global economy’s deepest recession since the 1930s.

However, in this week’s Rabobank Dairy Quarterly report, dairy analyst Ben Laine warned milk production is forecast to expand, and much price support driven by government aid will slow (except in the US).

Market fundamentals will again take hold, in a slower economy, putting pressure on dairy product prices. And the world’s largest dairy importer, China, is forecasted to import 15% less product in 2020.