Bleak economic outlook and high rates of coronavirus in key importing regions of most concern to dairy co-ops

EU processors to increase milk prices but ICOS says market 'very challenging'

The EU is the most price competitive region for cheddar, but exports of EU skimmed and whole milk powder are difficult.

EU milk price prospects remain promising, with some large processors increasing payments in the coming months.

In August, FrieslandCampina based in the Netherlands will add €1 per kg, while Lactalis (France) and DMK (Germany) will increase prices by 60c and 50 per 100kg, respectively, according to the milk price comparison carried out by ZuivelNL on behalf of the LTO Nederland farmers organisation, in collaboration with EDF (European Dairy Farmers).

Granarolo (Italy) and Arla (Denmark) will maintain current prices through September.

The Saputo Dairy UK milk price will also remain unchanged in August, but will increase in September due to expiry of a seasonal levy.

Markets are relatively stable despite the Covid-19 pandemic and the milk volume increasing in major dairy exporter regions (including the EU), to 1.8% higher in the first half of 2020 than in the previous year.

According to the ZuivelNL analysis, the butter market is stable since a sharp rise at the beginning of July.

The skimmed milk powder (SMP) price quotation stabilised in the second half of August.

Export of EU skimmed milk powder are difficult, because produce from the US is cheaper, and the price difference is magnified by the unfavourable euro-dollar exchange rate.

The same holds for European whole milk powder (WMP), but price quotations for the product have been stable in July and August.

On the world market in mid-August, EU-27 butter prices were 16% higher than in Oceania, and 23% higher than in the USA.

SMP prices in the EU were 10% lower than in Oceania, and 17% higher than in the USA. The EU was the most price competitive region for cheddar.

Compared to the US, the EU-27 is more price competitive for WMP, but less competitive than Oceania.

However, ICOS, representing the co-ops, says the current situation is very challenging for dairy markets, as coronavirus continues to wreak havoc.

ICOS says the bleak economic outlook and high rates of coronavirus in key importing regions are of most concern. The foodservice sector is likely to remain extremely fragile.

Chinese and South East Asian demand is solid, which has supported the market.

Government support packages have helped, especially in the US, but there is a time limit on these.

•  Meanwhile, ZuivelNL’s analysis of the milk payments documents of farmers supplying 16 EU processors (including three in Ireland) showed an average price for July milk of €32.51 per 100kg.

The analysis shows Kerry Agribusiness paying €31.27, Dairygold paying €30.80; and Glanbia €30.29, for July milk (standardised at 4.2% fat; 3.4% protein; 1,000,000 kg per year; TBC 24,999 per ml; SCC 249,999 per ml; VAT excluded).

Arla Foods in Denmark was the only big EU milk processor to cut the price for July milk.

Milk prices are lower at most processors than the July 2019 prices, except for the three Irish processors, Capsa in Spain, and Valio in Finland.

Compared to a year earlier, the price is €1.30 per 100kg better at Kerry; 60c better at Glanbia, and 50c better at Dairygold.

But the average milk price in the ZuivelNL analysis is 3.3% behind the average of a year previously.