As it stands right now, global dairy markets are in quite a healthy position.
Prices for commodities such as butter, cheese and milk powder have recovered well in the second half of 2020 and, in general, prices are in line with where they were this time last year.
European spot prices for butter are in a healthy position at just under €3,300/t, while the price of skimmed milk powder (SMP) has rallied in the final weeks of 2020 to stand at just under €2,200/t. At this level, a butter and SMP mix offers decent returns.
On cheese markets, cheddar prices are also in a steady position at €3,150/t, while mozzarella prices have recovered slightly to stand at €2,550/t.
The shutdown of the food service industry hurt mozzarella producers most.
While dairy commodity prices are in a solid position right now, there is still significant uncertainty in global markets, although it is easing. The vaccine is in the process of being rolled out globally but COVID-19 continues to influence business decisions.
Many dairy buyers are understandably nervous about buying too far forward given the volatility we’ve seen in prices in 2020. However, once things start to normalise next year and trade flows settle down to a familiar pattern, confidence should return for buyers to make longer term decisions.
This is hugely important in terms of stabilising markets and ensuring milk prices are consistent over the year. Aside from COVID-19, the level of spring milk in Europe in 2021 will have the greatest bearing on Irish milk prices.