Dairy Market Report Q4 2018

Hello everyone, I hope you are enjoying a relatively stress free build up to Christmas! The festive season is indeed upon us and as we look back over the year we can be correct in saying it has been another drama filled period in the dairy industry. After the record high pricing in 2017, the general feeling was 2018 would see a gradual reduction in pricing. However, seasoned experts were proved wrong yet again as we saw another dramatic increase in the Spring on butter especially. Thankfully we seem to have got over the worst 2018 threw at us but who knows how 2019 will play out?

butter in the dairy market
Butter prices have been easing
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cheese prices in 2018
Cheese prices have also eased back
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Brexit negotiations and the dairy market
Continued Uncertainty
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lacpatrick lakeland merger
Lakeland and Lacpatrick merger
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dairy health
International study carried out by McMaster University in Canada
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As the end of the year descends upon us it is hard to believe how quickly it has all passed by yet again! We understand that 2018 was another challenging year for all of our customers who have had to deal with more turbulence on their pricing. We live in uncertain times both in the dairy sector and politically so nobody can be sure what 2019 will bring. However, we are encouraged by the developments of recent months and we will keep our customers closely updated as we see more activity. Again, we would like to thank everyone for keeping faith with us over the course of the year and we hope you are satisfied with the effort we put in.

We wish everyone a very happy Christmas and a prosperous New Year. Bring on 2019!

Yours Sincerely,
Ian Galletly

Butter prices have been easing across all sectors

butter in the dairy market

Prices have been easing across all sectors since the summer and this has reduced pressure on buyers in the run up to the critical festive season. Butter has dropped significantly and is now around the €4250/ton mark.

While this is still a high price considering historical levels, the relief is still palpable for buyers as the outlook was looking extremely grim earlier in the year. There is talk of a significant amount of butter stocks across the EU which is gradually forcing the price down. However we won’t talk too soon on the butter price as nobody in the industry would be surprised to see this change in the New Year considering what has happened since Q1 2017.

Cheese prices have also eased back

Cheese prices have, like butter, also eased back following the trend of butter. Cheese had been relatively stable over the summer but there has been significant downwards pressure since then. Mozzarella is now trading around the €3300/ton mark and Mild Cheddar is around a similar level.

Again there are signs that significant stock levels are at play here which has worked to the advantage of buyers. Many long term contracts were also higher priced than the level we’re at today which has further strengthened buyers’ hands. There are expectations of more reductions in 2019 but again we have to be cautious as we were making the exact same predictions this time last year! If common logic is applied prices should ease but nothing is predictable anymore as we are all too aware of.

Continued Brexit Uncertainty

Brexit negotiations and the dairy market

While the dairy market has experienced its fair share of volatility over the last few years there is also the ongoing Brexit negotiations to deal with! Politicians in both UK and Europe still seem to be in great uncertainty about what the eventual outcome will be.

 

The drama surrounding Theresa May’s decision to delay the parliament vote hasn’t helped the currency this week and the euro went immediately back to around the same level against the pound from early 2017. The impasse is of particular importance to the European dairy industry as the UK is a huge importer of cheese and butter especially. Hopefully sense will prevail eventually and we will have a sensible deal that will suit all parties and common logic suggests this will be the case despite the current hysteria. However, the way negotiations have gone so far are not doing anybody any favours so we’ll hold the page for now.

Lakeland and Lacpatrick merger

lacpatrick lakeland merger

There was a major announcement of a merger between the Irish co-ops Lakeland and Lacpatrick. The two co-ops are based around the border region and have a combined 3,200 milk suppliers with an overall pool of 1.8bn litres. This will make the new merged co-op the second biggest in Ireland after Glanbia.

As both co-ops operate in the border region it seems to make sense to combine to alleviate the possible barriers on a potential border provided by Brexit. This will also provide a great opportunity to increase exports due to the large upscale in operations which will make them a bigger global player. The increased scale of efficiencies may be needed for Irish co-ops to stay competitive in the growing export markets. The likes of Denmark, Netherlands and New Zealand divert their milk production to ‘super co-ops’ for example. The director of Dairy Industry Ireland, Conor Mulvihill, said in an interview with the Irish Independent that further integration across the Irish dairy industry is inevitable.

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