Global dairy balance looks more promising, says DairyCo report

Global dairy supply and demand may be starting to re-balance, according to DairyCo’s latest report.

“There appears to be more confidence in European dairy markets as we move through the EU milk production peak and milk supply moderates,” said its July report. “Expectations that available supply may be slightly lower than forecast has helped to firm markets.”

Prices in June had been firmer for most products, particularly butter and cream, bringing industrial customers back to the market. However, there were tentative signs that the market may be quietening down again and prices may remain stagnant until September.

Average dairy commodity prices fell back by 5.9% at Fonterra’s latest Global Dairy Trade auction on 3 July with the drop largely the result of greater volumes of product on offer than had been expected.

In the UK, soft fruit sales had boosted bulk cream values while UK bulk butter prices were firmer, in line with prices on the continent, said DairyCo.

Daily GB deliveries in June fell below the average for the last three years and farmgate price cuts are expected to have a further negative impact on milk production.

UK deliveries for the two weeks ending 30 June averaged 38.3m litres/day, which is 1.5% lower than the same period last year while GB deliveries in the same period were down 2.1%.

Factors affecting global prices and markets include

  • Whether product stocks will be sold before the next flush of milk begins in the southern hemisphere
  • Emerging economy growth rate
  • Impact and extent of deepening recession in Europe

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