Despite the fact that EU milk production for the first quarter of the year was 2% lower than the same period in 2016, the European Commission expects an overall increase of 0.6% this year compared to last year. Some of the major EU milk producing countries have had lower collections so far this year but the same can be said in South America, Australia and New Zealand.
Irish milk production for the year is forecast to be 5% ahead of 2016.
EU exports of dairy products are good and the remunerative prices for butter bode well for the milk price. On the flip side, the accumulated SMP stocks, expected recovery in New Zealand milk collections and continued growth in US supply could put downward pressure on price.
A further increase in consumption of dairy products in Europe is also forecast. In 2016 consumption rose by 1.5m tonnes (1.5m kg) – mainly through cheese, WMP, butter and yoghurt. The latest forecast from DG Agri expects this to rise by a further 1m tonnes this year.
EU exports continue to grow, but at a slower pace for cheese, butter and liquid milk. Imports have increased in most destinations, particularly in China.
Overall, the market continues to be characterized by an unprecedented price gap between fat and protein. Market sentiment is however rather positive, given dynamic demand both in the EU and from third countries.