Positive EU milk price prospects to end of year

Irish co-ops warn of downside risks such as Brexit

More than 53,000 tonnes of butter will be released shortly from the EU's Private Storage Aid scheme, but markets are buoyant.

Irish co-ops say dairy market supply fundamentals remain positive, but warn that continued uncertainty over Brexit and the expected administrative delays affecting trade with the UK in 2021 are downside risks.

Milk prices remaining relatively strong is good news for Irish farmers who delivered an impressive 50 million litres of milk more in October 2020 than in October 2019.

This 8.3% increase (from 604.7 to 654.7 million litres) took the January to October year-on-year milk supply increase to 3.7%,

With butterfat and protein contents also running slightly higher this year, production of butter, skimmed milk powder, and cheese has increased. Whole milk sales are also trending higher.

Meanwhile, milk prices across Europe have increased slightly, and the price trend is positive for November and December at some leading EU processors that set prices in advance.

And the 4.3% average price rise in Tuesday’s Global Dairy Trade event brought more encouragement for the EU dairy industry, with rises of 3.8% for butter, 2.4% for cheddar cheese, 3.6% for skimmed milk powder, and 5% for whole milk powder (their biggest jump in five months).

In the monthly milk price comparison carried out by ZuivelNL on behalf of the LTO Nederland farmers organisation, in collaboration with EDF (European Dairy Farmers), the average October milk price paid to farmers increased slightly, narrowing the 4.5c per litre gap behind last year’s prices.

Of the 16 processors included, only Danone (France) lowered the milk price in October.

And the milk prices of DMK (Germany), Savencia, Lactalis (both France) and FrieslandCampina (Netherlands) will remain unchanged in November, while the price at Arla (Denmark) increases €1 per 100kg for November and December. Prices at Milcobel (Belgium) and Saputo Dairy (UK) will remain unchanged in November and December.

The EU milk supply (including the UK) increased by more than 1% in September, recovering from summer drought effects.

The largest increase took place in Poland, France and Ireland. The German milk supply continued to decline, with the overall EU milk supply up 1.1% in the first three quarters of 2020.

The milk supply of the major global dairy exporters (including the EU) was 1.8% higher from January to September in 2020, compared to 2019.

According to ZuivelNL, the fundamentals in the butter market are high prices (unchanged since June) and limited demand.

Prices of skimmed milk powder came under some pressure at the end of October and fell slightly until mid-November, partly due to increasing competition from the US, able to offer competitively on the world market due to the euro-dollar exchange rate. The price level stabilised in the second half of November, and supply and demand are currently reasonably in balance.

The whole milk powder price has increased slowly since the second half of October, but the EU price is too expensive for the world market, with sales therefore limited to the internal market.

The EU has dodged the milk price impact of the Covid-19 crisis, which is most evident in the US, causing extreme fluctuations in the class-3 (for cheese) price, which has a big bearing on the overall average US milk price. The class-3 price increased from $16.43 per cwt in September to $21.61 in October.

The Irish market situation is that supply fundamentals remain positive, as markets appear to be better adjusted to the Covid-19 situation and changed consumer behaviour, according to ICOS, representing co-ops.

ICOS noted however that more than 53,000 tonnes of butter will be released shortly from the Private Storage Aid scheme which the EU Commission introduced on May 7 as an emergency measure to support the industry through the first Covid-19 lockdown phase.

ICOS said cheddar cheese demand is stable.

ZuivelNL’s analysis of the milk payments documents of farmers supplying 16 EU processors (including three in Ireland) showed Dairygold paying €31.87 per 100 kg in October; Kerry Agribusiness paying €31.70; and Glanbia €31.15 for 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).