This is a subscriber-only article
The outlook for milk prices in early 2018 is not encouraging, Dr Mike Johnston from industry body Dairy UK told NIIAS members before Thursday’s RUAS Winter Fair in Lisburn.
Increasing milk production in the US, New Zealand and the EU, and the 380,000t of skimmed milk powder in EU intervention overhanging the market, is putting a drag on sentiment among dairy traders.
“Commodity buyers are buying short again; their thinking is it will be cheaper next week,” Johnston said.
He said that the current cycle in dairy markets is heading south and will be reflected in milk prices in the new year.
However, Dairy UK’s NI director made it clear that this downward movement in prices was different to the last period of milk price pressure in 2015 and 2016.
Active demand
Demand is still there and big commodity buyers, such as China, are active in the market. “The Chinese weren’t engaging last time round,” Johnston said.
He also pointed out that increasing oil prices could help demand from oil-exporting countries.
This means the current pressure on markets is coming mainly from supply. Johnston said that compared with last year, production in the US, New Zealand and the EU in the first 10 months of the year is up 1.3%, 1.9% and 1.1%, respectively, with global production up 1.3% overall.
He pointed out that only 7% to 8% of global milk production is traded, so overproduction can quickly lead to more product coming on to international markets and subsequent price pressure.
SHARING OPTIONS: