There continues to be uncertainty in global dairy markets, with volatility continuing to drive down prices.

Supply is continuing to outstrip demand, with markets remaining fragile.

Last year, there was a pull-back in EU production in the back end of the year, which helped lead to a rally in production in the last quarter of the year, giving the market some hope.

There was some concern in the industry in the last months of 2016 that the recovery in production was supply-led.

Delicate markets

Meanwhile, with EU peak milk production fast approaching, dairy market recovery remains delicate, director of the Irish Dairy Industries Association (IDIA), Conor Mulvihill, has said.

Mulvihill said that the IDIA has been working with officials in Brussels to ensure the Commission remains “prudent and cautious” on the potential sales of existing stocks.

“The gap in price between protein/powders and fats has never been bigger and with the EU peak we do fear for the fragile milk recovery.

“Cheese and butter are still very encouraging though,” he said.

Globally, with the floods on New Zealand’s north island being offset by strong output from the US on the “supply event” side, the focus is back on the EU’s peak, with a lot of product expected to be coming on to the market, he said.

There also remains an overhang of skim milk powder (SMP) stocks at the moment, with product selling below public intervention price levels.

Product is also being offered back into public intervention. Two weeks ago, Poland became the first country to offer SMP (479t) into intervention since September 2016.

Last week, it was followed by Germany and Lithuania, which placed 479t and 250t respectively into intervention.

This overhang is in turn putting pressure on other dairy products, such as casein. Whey powder is not under as much pressure and is seeing good demand.

Meanwhile, with Brexit on the horizon and so much Irish cheese being shipped to the UK, some dark clouds are gathering on the horizon here with the industry focused on what may be coming down the tracks.

EU SMP exports

Data from the European Commission shows that EU SMP exports in 2016 were down 17% on the year previous, coming in at 574,200t.

With France and Germany being the key exporters, both member states consigned less than they did in 2015.

SMP is the second biggest category of dairy exports in the EU after cheese.

In the US, milk production continues to increase, with milk yields growing and cull rates in decline.

The production increase is broadly based across the US – previously it would have been focused in the Midwest.

The increase could see more product being available in that market and should there be no extra demand internally, this could pose problems for Irish and EU exports of dairy products into the US.

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