The latest information from the European Commission continues to build on the positivity signalled from the start of 2021.

While EU milk deliveries are up 1% in 2021, only modest growth is expected in the big dairy European countries.

The EU expects Germany and France milk supply to grow by only 0.2% in 2021.

Assuming a normal weather year, they also expect more feed to be produced on farm, which would see yield increase 2% in the EU.

Both of these measures show no huge growth in milk and the expectation is that the EU dairy herd will be further reduced by almost 1%.

The other big player on global supply markets is New Zealand and while milk production increased again in January 2021 (+0.8%), milk supply is relatively stable. NZ had a good grass growth year in 2020/2021. The outlook for next season (2021/2022) is for a drop in supply (-0.3%). North and South America continue strong milk supplies, but outlook is lower for 2021.

In summary, on the supply side there doesn’t look to be any big change on the way. On the demand side, the expected lift in food service demand in the second half of 2021 will underpin cheese and butter consumption, with stability in powder demand.

They also point to the fact that cheese prices will be supported by the lift in US tariffs and Chinese demand for powder remains high.

With little or no stocks on hand, it’s clear that markets are heading to pre-virus levels. Dairy demand absorbed the increased milk supply in 2020. The reduced need from food services was compensated by higher retail demand.

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