It was another poor week for dairy prices, with the European spot market price for butter dropping €155/t, whole milk powder (WMP) and skim milk powder (SMP) both dropping €85/t and cheddar losing €30/t in value.
These price cuts are on the back of negative GDT auction results last week, amid weeks of price drops on the spot market and general despondency in the dairy markets.
The market dynamics haven’t changed – supply is increasing in the northern hemisphere and China - the big buyer of dairy products - is continuing to sit it out. For how long more they can sit it out remains to be seen, but the longer they do, the more negative the sentiment gets.
Meanwhile, in its short-term outlook for 2023, the European Commission is expecting actual milk production in the EU to decline by 0.2% this year, as farmers cull cows due to high feed prices, high beef prices and low milk prices.
It is predicting that the EU dairy cow herd could shrink by 1% in 2023, but that higher yield per cow will negate a lot of the effect on milk output with fewer animals.
This assumes normal weather conditions, with the drought in Europe last year having a negative impact on milk yield.
The Commission paper states that consumer prices for dairy are continuing to rise in Europe, with butter the only product to have reached its peak. The Commission says that consumers are looking at cheaper options - which is bad news for Kerrygold - but that demand is remaining stable. It says that dairy stocks in China are at normal levels.
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