Intervention stocks will be cleared by May next year

In a dedicated session on dairy markets, a panel including dairy traders and market analysts from Ireland, the US and the Netherlands discussed the health of global dairy markets today and moving into 2019.

In its simplest form, milk supply will continue to drive farmgate milk prices into 2019. A surge in European milk collections in spring 2019 will not be good for dairy market prices said Rik Loeters, director of Trigona Dairy Trade in the Netherlands.

However, if milk supplies remain consistent, there is significant room for dairy prices to rise in 2019, particularly as the EU continues to clear its stocks of SMP in intervention. John Lancaster, head of EU dairy consulting at INTL FCStone, said Irish milk prices for next year are likely to decline to between 28c/l and 30c/l.

He added that European milk prices would need to adjust downwards to match where dairy commodity prices are currently sitting.

On trade in dairy markets, Lucas Fuess, director of market intelligence with HighGround Dairy in Chicago, said he was worried for the future of the US dairy industry to see the EU signing a number of significant trade deals in the last year at the same time as US President Donald Trump was pulling the US out of trade pacts.

He added that the EU had stolen significant market shares from US dairy exporters due to the cheap price of EU skimmed powder in 2018.

Milk supply

1. A spring surge in EU milk will hurt milk prices.

2. New Zealand milk supply looks very strong.

3. US milk supply has grown 33 months in a row and will continue to expand in 2019. Dairy prices

1. There is still a high imbalance between the price of fat and protein.

2. EU intervention stockpile of SMP will be cleared by May.

3. This will help lift milk powder prices similar to 2009/10.

4. €4,000/t to €4,500/t is the new normal for butter prices.