Ornua CEO John Jordan was speaking at the ICMSA AGM during the week and he talked about a pending economic crisis in some of our trading partners for dairy product.

His concern was that the demand for dairy products might take a dip in 2021 given the issues at risk to global trade such as Brexit, COVID-19 or currency swings as a result of economic issues, etc.

Remember also that Ornua has four manufacturing facilities in the UK with 1,000 employees over there. His comment on markets was that dairy demand looks unbalanced, but the market was not behaving in that manner.

Fonterra forecast

The day after the ICMSA meeting, Fonterra announced a strengthening of forecasted milk price for its suppliers, who are in peak or just gone past peak milk supply.

This optimism is largely driven on the fact that China is going well, as New Zealand supplies a lot of the whole milk powder into China.

Global exports remain strong year to date, although volumes have weakened in recent months and trade remains heavily reliant on Chinese buying.

Industry commentators suggest the futures markets are still holding firm for the first half of 2021. Retail got a further boost with the lockdowns across Europe and the US again.

Sentiment is improving with talk of an early vaccine roll-out to kick-start food service.

Quiet market

The market has been quieter than normal of late, with seasonal buying on hold until clarity emerges on lockdowns and Brexit.

Chinese buying continues to exceed expectations (+10% year to date), but the rate of growth is likely to ease.

EU dairy commodity prices are stable to slightly firmer, while, as mentioned above, the NZ forecast rose again. US prices eased in line with weaker product pricing.

The dairy market has been resilient in 2020 and remained balanced, despite dairy supply outstripping demand at times.

Based on what we know now, you would expect 2021 to deliver prices in line with 2020, but farmgate milk price could increase or decrease depending on a few factors.

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