In January this year, the euro was trading at less than $1.05 against the US dollar. However, in the space of six months, the European currency has hardened considerably and this week’s exchange rate will see you get $1.18 for a euro. That’s a 13c swing in value in a very short period of time.

For dairy markets, the value of the US currency is crucially important with all dairy commodities traded in dollars. At the current exchange rate, EU dairy exports are becoming increasingly uncompetitive against product from the US and New Zealand.

For example, the spot price of butter in the Netherlands this week is trading at €6,300/t. However, in dollar terms, the price of EU butter this week is almost $7,500/t, which is about $1,700/t more expensive than butter sourced from the US or New Zealand. The swing in the euro to dollar exchange rate since January has added about $850 to the price of a tonne of EU butter.

And while the butter situation in Europe is very acute right now, the exchange rate swing is having an effect on other commodities too. At a price of $3,670/t this week, EU whole milk powder (WMP) is about $500/t more expensive than US or New Zealand WMP, with currency movement accounting for about $400 of this added expense.

With almost 50%, or €1.7bn, of Irish dairy exports sold in markets outside of the UK or Europe in 2016, the current euro to dollar exchange rate will be a concern to Ornua and our dairy co-ops as it eats into our low-cost competitive advantage.