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Irish milk prices for next year are likely to decline to between 28c/l and 30c/l, according to John Lancaster of FC Stone.
Lancaster, who is head of FC Stone’s EU dairy consulting, said compared with commodity prices European milk prices were overvalued and there would need to be “an adjustment”.
Lancaster was speaking as part of a panel discussion at Dairy Day about the outlook for key dairy commodities for the next 12 months.
He was joined by Rik Loeter, director of Trigona Dairy Trade in the Netherlands and Lucas Fuess, director of market intelligence at Higher Ground in the US.
SMP
Loeter opened his presentation by saying: “Trade is like market predications. You are either wrong or you just got lucky.”
He predicted global milk production to continue rising, driven primarily by the EU and the US. He also said that demand was continuing to rise, driven by China.
He said there was likely to be a large clearing of EU skim milk powder (SMP) intervention stocks at the next tender.
Prices, he said, would rising towards a mark of €1,300 as the European Commission sought to sell 20,000t to 30,000t of product.
Trade is like market predications. You are either wrong or you just got lucky
Lancaster said SMP prices were currently like a beach ball that was being held under water by intervention stocks.
He said once stocks were cleared the beach ball would rise and there would be normalisation in market prices for SMP.
Butter
Butter was the other major commodity discussed. Loeters said the current fluctuations in the butter market would likely continue but the range in which they did would be significantly higher. He said the new average butter price was likely to be around €4,000/t.
Fuess said a similar trend had been seen in the US back in 2015 when the average price of butter rose to approximately $2/pound (€3.9/kg) but with large fluctuations.
Consistent growth
In terms of US markets, Fuess said milk supply was a story of constant and consistent growth as October was the 33rd month of straight growth. However, he said that milking cow numbers had begun to decrease and that US farms would enter an unprofitable phase over the coming winter.
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