Dairy markets stable as EU milk peak passes

By Helen Eustace, DairyCo

Global commodity market prices are showing signs of stabilising as the EU milk production season passes its peak and before the Oceanic season begins in earnest.

However, price predictions for the coming months are mixed, with some analysts predicting higher global prices because of relatively low milk production in key exporting countries. Other analysts suggest that a short-term rise in prices is less likely with the USA reintroducing its version of export subsidies and the latest Fonterra auction recording a further fall in price for whole milk powder.

Closer to home, the beginning of the soft fruit season has meant that bulk cream prices are edging closer to £1000/t, from £870/t in May. With falling incomes from cream being widely cited as a reason for price cuts on liquid milk contracts earlier in the year, this upward movement should help prevent further cuts in the coming months.

Despite April milk production increasing on last year, May’s milk production returned to the declining trend. UK production for May totalled 1.2bn litres, 28m litres (2.3%) lower than last year. There was a much smaller drop in Britain of just 1.1% year-on-year, whereas Northern Ireland’s production fell 8.1% – affected by poor weather and possibly poor prices. The average farmgate price in Northern Ireland was about 8p/litre lower than the UK for March milk.

Although it is still early days, the quality of first-cut silage looks more promising than recent years. With feed prices remaining high, it is likely that many farmers will take advantage of better quality silage and feed less bought in feeds later in the year to reduce pressure on margins. This may result in yields remaining similar to last year, or decreasing further, suggesting that we are unlikely to experience a large increase in production in this milk year.

Click here for DairyCo Datum League Table April