Speaking to the Irish Farmers Journal on a trade mission to the Gulf States this week, Ornua's Joe Collins said that despite a recovery in global and domestic prices, a nervousness remains in the market.

“I think we have seen in the last six or eight weeks that there has been a supply improvement. There has been strong growth in the States (and) not as large declines are we expected in New Zealand and, even in Europe, there have been indications that there might be more milk as we move into quarter two, quarter three,” Collins said.

Collins, who is director of the dairy trading and ingredients division with Ornua , said global issues such as the UK electorate’s decision to leave the EU and Donald Trump’s election across the Atlantic has not helped to create stable markets.

Collins added there has also been the continuation of a strong milk supply in the US coupled with a stronger than anticipated supply in New Zealand.

“That supply response has come at a time when demand has slowed a little. Some of it is due to the higher prices and some of it is due to the fact that we have two pretty big geopolitical issues there at moment in Brexit and the new American administration.

“Both of those things have created uncertainty; markets don’t like uncertainty. We find that buyers are buying shorter periods and smaller volumes and that alone makes sellers nervous.”

’Butter is back’

Despite the uncertainty and a slowdown in the recovery of prices, the performance of Irish butter, according to Collins, is a bright spot for Irish farmers.

This has been most welcome, considering the weakness in demand for skim milk power (SMP), as well as the large quantity of SMP still in intervention.

“As it (SMP) gets older, it has less food significance, but there is a fairly big skim feed market. Skim has been particularly depressed. It’s not just high stock in Europe, but there are high stocks in Canada and the States. Skim has moved from being the main product 10 years ago and butter being the by-product to butter being the main product and skim is the by-product.

“Butter demand is being driven by the consumer and the consumer wants butter. It is seen no longer a villain for health and it is seen as being in vogue, it’s good for you. Certainly, butter is back.”

Listen to “'Butter is back' - how will the dairy market be in 2017?” on Spreaker.

Read more

Dairy trends: sticky milk powder market remains a threat