In our last market update we reported of prices easing and a period of relative stability in
the dairy industry. Wishful thinking! All the usual logic that says the start of milk production
should bring lower prices has gone swiftly out of the window due to an unprecedented
shortage of butter. This is due to a huge demand from consumers which has led to a severe
shortage of butterfat. We were hopeful that 2017 would see the period of relative stability
being maintained after the huge price volatility over 2H 2016. However this has proved to
be an illusion as butter prices have reached record levels and other dairy products are fast
on its heels.
As we look ahead to the summer months there are signs of relative stability in the dairy industry which has calmed fears of long term turbulence. The milk production season has started strongly due to favourable weather conditions. This has significantly boosted stock levels and prices have eased from the very high levels witnessed in Q4 2016. Prices are still far above the low levels of this time last year however so buyers are hopeful the reductions will continue throughout the year. While there has been much optimism from buyers in the last few months it is unrealistic to think the prices of 2015/1H 2016 will be reached again soon.
©PTF Dairy Market Report April 2017
Dairy Market Report Q1 2017
Happy new year to everyone and let’s hope 2017 does not contain half the drama of the previous year! It is fair to say everyone was caught off guard with the level of pricing turbulence in the latter half of 2016. Such a sharp jump in prices over a short period of time is unprecedented and a clear sign of the unhealthy nature of the low milk prices in 2015. If there are any positives to be taken out of this period of volatility then it is the hope that milk prices will not be driven down again to such unsustainable levels for farmers.
Dairy Market Report Q4 2016
Where to start? While it is a great relief to many in the industry that we have finally seen a long awaited price recovery, nobody foresaw the events we have witnessed in the last 4 months. It is fair to say that the severe lack of supply and extreme increase of prices in such a short period of time has never been witnessed before. Of course we had the 2007 crisis but even that pales in comparison with what we have just witnessed during the summer of 2016. There is a feeling that prices are heading towards the record levels we saw in 2012/13 and there is nothing much anyone can do to stop it.
In the last report we commented on how prices had seen a recovery which was mainly down to the EU intervention scheme. However the main concern now is the severe lack of milk supply in the marketplace. This has been caused by farmers being forced out of the market due to the poor returns on offer during the last two years. Also many farmers accepted incentives from their processors to cut back milk production at the start of the year. All of these factors have now combined to drive prices up at a phenomenal rate. The supply situation is so fragile major processors are struggling to keep up with regular demand, never mind supplying any new business! As we move into the winter season it is fair to say the milk supply will not recover before Spring 2017.
Dairy Market Update Q3 2016
As we move into the summer it is time to finally announce a long waited price recovery in the dairy industry. Significant upwards movement has been witnessed in recent GDT auctions in the last few weeks with many predicting this may be the common trend over the summer months. A slow start to the production season along with increased demand from Asia has certainly influenced the market but again the main driving force behind the global market has been the actions of the EU member states.
As mentioned in our Q2 report, all of the EU agricultural ministers met in Brussels in the Spring to discuss the crisis in the dairy industry. Prices have been falling at a phenomenal rate for the last two years which has driven the milk price down putting many farmer suppliers under severe pressure. A key factor in this was the abolition of EU milk quotas in 2015. Many farmers expanded their facilities in preparation for the removal of quotas as they believed it would herald a bright new dawn with no restrictions on milk production.