As repeatedly stated in this column, the spring flush of milk in Europe can have a major bearing on dairy market sentiment. A surge in European milk supply in March, April and May has often sent global dairy prices tumbling.

Yet for all the uncertainty that remains with COVID-19 and Brexit, the outlook for dairy markets in 2021 looks increasingly bright.

Underpinning this positivity is the weakness in milk production from some EU member states, most notably France and Germany.

Official figures have yet to be published, but it’s understood French milk production is down as much as 4% in the opening weeks of 2021 compared with the same period last year. At the same time, it’s understood German milk supply is also down sharply this year.

And while there is still milk supply growth in Ireland, Poland and less so in the Netherlands, the decline in German and French milk production is hugely significant, as they are the number one and two milk-producing countries in the EU.

The weakness in French and German milk production, coupled with unprecedented supermarket demand for traditional dairy products, is really underpinning market sentiment right now. European butter prices increased again this week to €3,560/t, while cheese markets remain in a really healthy position.

On the milk powder side, there is exceptionally strong demand from the confectionary industry, as consumers stuck at home are treating themselves more than ever. It’s still early in 2021, but the outlook for milk prices this year is quite positive.