GB milk production returns to expected pre-Covid-19 levels

GB milk production looks to be roughly back on track, just above the level at which AHDB Dairy estimates it would have been had producers not had to make coronavirus cuts to output.

Production is currently running slightly above the latest forecast, which was published in June, but only by a marginal 0.7%, says the levy body.

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Its latest estimates show milk production was cut by 75m litres in April to June, with the reduction primarily driven by removing cows from the herd, as well as drying cows off early and limiting yield growth.

UK lags behind EU farmgate prices

UK milk producers received 3.27p/litre less for their milk on average in June compared with their EU-27 counterparts, according to statistics from the EU’s milk market observatory (MMO).

These show an average UK price of 26.88p/litre in June and 30.15p/litre in the EU-27 member states.

These prices were in turn 1.23p/litre lower than a year earlier in the UK and down 0.79p/litre in the EU.

Dairy markets

Despite global milk supply and demand being relatively well balanced, some price weakness has crept into skim milk powder (SMP) markets in the past couple of weeks.

Butter prices, in contrast, have been very stable, says Peter Meehan, senior commodity analyst at StoneX.

“This week saw the European SMP quotation post its third decline in a row as it came in at €2,083 [£1,883], down 2.0% on the week”, said Dr Meehan, while it has dropped almost 6% over the past five weeks.

The European butter quotation held firm at €3,385 (£3,061) for the sixth consecutive week.

Last week’s GDT auction in New Zealand also removed some market support from global dairy prices, with its overall index down by 5.1%, driven mainly by falls in whole milk powder (WMP), SMP and butter.

Global dairy supply

The latest milk supply data for the top-five global dairy exporters shows production in May up 0.8% on last year, with the EU-28 up just +0.1%, New Zealand at +3.8, Australia up 7.6% and Argentina rising by 13.1%.

The US was the only one of the five to see a slight decline in May, although US production was back in positive territory in June, said Mr Meehan.

The UK saw a slight rise in June (+0.1%), Polish production rose by 4.6%, Irish by 2.9% and New Zealand by 1.8%.

Chinese dairy imports were a mixed bag in June, with some categories like WMP, SMP, infant milk formula and butter all down on last year while anhydrous milk fat, cheese and whey imports were very strong.