The slippery slide for dairy commodities continues this week, with butter continuing to lead the charge, losing 10% of value in a week.
The price is down a massive €455/t to €4,175/t (from€4,630 last week).
A tonne of butter on European markets was costing north of €7,000 during June and July, making those heady days of summer seem like a distant memory.
Cheese prices are also falling, with cheddar down €260/t on top of the €240/t drop experienced last week. A tonne of cheddar has dropped below the €4,000/t mark, with €3,965/t now the going rate.
It looks like the stable GDT results at the last auction did little to satisfy traders in Europe as the bloodbath in the markets continued. Whole milk powder dropped €115/t to €3,535/t.
At this stage, it looks almost inevitable that a farmgate milk price drop is on the way. Some are saying it’s in the post, with the only question being when will it come and to what extent it will hit.
Don’t forget that in the Irish context, there could be a lag of up to six months between commodity prices and farmgate milk prices, depending on how far ahead processors have sold product.
The expectation is that prices should be relatively stable for the next few months, but that a correction will have to take place before the summer peak.
Lower milk prices now may send a signal to European producers not to increase production. This will help to keep supplies low. On the demand side, the big uncertainty is when China will re-enter the market.