What is driving the recent lift in GDT (dairy markets)?

The lift has been mainly driven by demand from China and Southeast Asia. Roughly 90% of the buying came from China and Southeast Asia with a 50:50 split.

What was very interesting was there was very little buying from Europe, the Middle East, and North Africa and to me that raises a few questions about the sustainability of this rally.

Is the slowdown in milk production in Europe making a difference?

The dramatic slowdown in milk collections across Europe has been registered everywhere.

Many processors have probably oversold forward now because they expected milk collections to be stronger and now you find a lot of processors who just aren’t selling anymore. This has created a panic on the buy side and bought the market up.

Why do Irish dairy farmers need a working futures market?

If you give a farmer the opportunity to manage their business more effectively, a lot of them, particularly the more commercial or bigger farmers, will want this.

They no longer want to be just price takers. They want to be able to manage their business more.

Why hasn’t a futures market for milk been developed already?

Futures markets in general take a long time to develop. Because people are not used to using these tools, there isn’t a familiarity or confidence using them and it takes time to learn how to use them effectively and incorporate into a farm business.

What is the next step for the European dairy futures market?

To get to the next level you need to get the natural seller and in my opinion that is not the processor but the farmer. The processors job is to collect the milk, process it and sell it for the best price possible. The farmer is the one who has the risk and to manage their price risk something needs to be done to link them to the buyers on the other side of the chain who have the opposite price risk.

How can a working milk futures market benefit farmers?

With farming the most important thing is margin. These tools could allow farmers to take away a large amount of their margin variation by allowing them to fix milk prices. It’s not about trying to beat the market, it’s about being able to bring more certainty to their margin.

What is FC Stone’s role in the industry?

A big part of our role is education. We are running a dairy risk management workshop in Cork from the 5 to 9 September. The idea of the course is just putting as much information out there as possible. If somebody trades once and it doesn’t work then that’s a disaster for us because we put in a huge amount of time in bringing customers on and getting them to transact.