European dairy prices are set to continue to fall until the second half of 2023, according to dairy market analyst with Vesper market intelligence Jasper Endlich, based in Holland.

Endlich was speaking at the Bord Bia dairy markets seminar held in Kildare on Tuesday.

He said that there is currently a temporary surplus of milk on the market, but he doesn’t expect this to last long, due to lower prices reducing milk supply.

Longer term, he says that growth in dairy will be curtailed by stricter environmental and sustainability regulations, particularly in Europe and New Zealand, but also in the US.

Growing supply

He says that milk price and supply growth was strongest in China, with the internal dairy supply growing by 8.57% in 2022 and by over 10% the year previously.

Endlich says that China has the lowest focus on sustainability of all regions, as it pursues its goal of being self-sufficient in dairy.

“New Zealand and Latin America have had more rain when they needed drought and more drought when they needed rain. Production numbers in New Zealand and Latin America are below -3% compared to the year before.

“In New Zealand, the payout price was very good, but the increased focus on sustainability will prevent them from growing any further.”

Consumer demand

Endlich says he doesn’t expect to see milk prices get as high as 60c/l again, as dairy products are just not profitable to produce at that level.

On consumer demand, he says that high prices are reducing demand for dairy, but that retail prices are now falling again and consumption is already starting to increase.

“Demand has been subdued, but some countries are coming back into the market. Big importing regions are becoming increasingly active. Lower prices do move additional demand because prices are more affordable.”

Milk price outlook

On the outlook for milk prices, he said that lowering price is going to lower supply over the course of the year.

“Payout prices will likely decrease to 40c/kg, some regions might be above, some regions might be below, but, generally, that 40c/kg is where milk price will land for this year. That will lower the profitability for farmers and that will lower milk supply in the months to come.

“At the same time, we will see the price in the dairy market bottom out, we are already quite close to the bottom and the potential to go lower from where we are is quite limited.

“Later this year, milk deliveries will become a bigger issue. The supply side of the market will be the reason why there will be the potential for prices to go up again.”

He said that global supplies will be flat for the year and this will lead to significant upside potential for milk price towards the end of the year.

“It won’t be as spectacular as the price rises we have seen in 2021 and 2022, as those are levels of price volatility that we are unlikely to see again, but there is upside potential by the end of the year.”