What happens at next week’s Global Dairy Trade (GDT) auction could give a good indication as to where milk prices are headed during 2018.

Summarising the current market situation at a conference organised by Fane Valley Feeds earlier this week, dairy industry consultant Chris Walkland said that the current market was very finely poised. But after two positive GDT auctions, the outlook was better than it was a month ago.

That increase has been driven by reduced volumes for sale, on the back of dry weather in New Zealand.

“The drought is worrying buyers, but not worrying them that much just yet. Production is really hard to predict.

‘‘Fonterra is down, but not out. The next GDT is critical,” said Walkland.

In the US, while volume is expected to continue to grow this year, at 1%, the predicted growth is lower than in previous years.

However, in Europe, there is the overhang of skim milk powder in intervention stores, and output is expected to be strong in 2018. “There is a significant risk that there will be too much milk in the spring flush. It might be right for you to produce more milk, but right for the industry if you do the opposite,” suggested Walkland.

In terms of local prices, he pointed out that NI usually tracks quite closely the returns coming from the GDT. However, at present, those prices are badly out of line, with the GDT currently returning around 24p/l to 25p/l, but local prices above 30p.

“Your price is going to come down quite quickly. It is way out there at the minute,” he said.

But, beyond that, he is now more hopeful that the market will steady around the 26p/l mark later in 2018.

“Budget for 25p, but cross your fingers for 26p to 26.5p,” he concluded.