Milk price rises in Europe
Leading milk processors across Europe are applying milk monthly price increases of 1c/l or more.

Arla Foods has announced a 1c/l increase in August for its 12,700 suppliers stretching from Sweden to the UK. Johnnie Russell, director of the co-op’s UK branch Arla Foods amba, said this would translate into a 0.81p/l increase for British farmers to 29.98p/l.

““The current market situation is characterised by strong demand and low stocks of fat and this is driving up prices for products containing fat,” Russell said. “Meanwhile, the protein market remains stable, however at a low level.”

Müller, another continental co-op collecting in the UK, said would raise its British price by 1.5p/l in August.

Three months of increases for Lactalis

In France, Lactalis, the world’s third largest milk processor, has announced a series of 1c/l monthly rises for the 5.6bn litres it collects annually in its home country. This will take the price to 34c/l in July, 35c/l in August and 36c/l in September at 4.1% fat and 3.3% protein.

“This evolution was expected by milk suppliers following the real difficulties of 2016 and must be matched by an increase in the price of our products,” said Lactalis group managing director Daniel Jaouen, hinting at tension on dairy prices across the supply chain from farmers to retailers in recent weeks. He added the new price was negotiated with producers’ organisations.

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NZ milk supply back in line with last year's figures
As New Zealand comes off a strong peak milking season, February production saw a fall back to 2018 levels.

New Zealand's milk production in February was 165,025t solids in February, virtually unchanged from the same month last year, according to the Dairy Companies Association of New Zealand.

This follows six months of strong supply, with figures higher than the previous two years throughout the southern hemisphere spring and summer.

While January production was 7.7% higher than the previous year, February supply was only 0.1% ahead.

For the season to date, NZ milk production has been up 4.9% on a milk solids basis.

Glanbia estimated this week that supply from New Zealand would remain stable this year.

Dry conditions are beginning to cause concern in key dairying regions, with Waikato regional authorities encouraging farmers to seek help if the weather affects their business. "Soil moisture levels are currently low, which means the ability of pasture to grow is reduced," Waikato regional council reported.

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Dairy Trends: EU dairy is competitive on world markets again

Dairy markets: French and German milk production is creeping higher

Dairy Trends: EU dairy is competitive on world markets again
European dairy prices are once again competitive relative to world market prices, which should put a floor on prices.

The clearance of the European Commission’s stockpiles of skimmed milk powder (SMP) sitting in intervention has allowed European dairy markets to normalise somewhat over recent months.

Butter prices have retreated from the record highs seen in 2017 and 2018 to just under €4,000/t this week on spot markets, which is still a very strong price in historical terms.

Similarly, European prices for fresh SMP are around €1,900/t this week. This realignment means that for the first time in a number of years, European dairy prices are once again competitive on world markets.

At this week’s GDT auction in New Zealand, the benchmark dairy index posted a near 2% gain in average dairy prices. This is the eighth consecutive positive result for the GDT.

This week’s GDT saw New Zealand butter prices jump more than 9% to hit €4,480/t, while SMP prices fell by 2% to just over €2,115/t.

In the US, spot butter prices are currently trading around €4,400/t, while SMP markets are priced at €1,915/t.

The normalisation of prices in European dairy markets is a positive for dairy farmers in this corner of the world.

European dairy exporters have taken a larger share of world export markets in recent years and the return to competitive prices will mean there is an important outlet for product.

With European dairy competitive once again on world markets, this should set a floor on dairy commodity prices as we enter a critical stage of the season in Europe.

'Conflicting dynamics' in milk price outlook – Glanbia
Mixed weather and trade signals are leaving dairy markets without clear direction for the months ahead, according to analysis by Glanbia.

Glanbia is forecasting slow growth in milk supply around the world this year, with uncertainty dominating the demand side of the market.

"It is estimated that global milk production for the top milk-producing regions in 2019 will increase modestly by 1%," the processor has said in a new market outlook, days after cutting its February milk price. The company forecasts 1% production growth in the EU and slightly more in the US, steady supply in New Zealand and a decline in Australia as a result of bad weather.

Continued uncertainty related to Brexit has seen UK warehouses full of stock

European markets are suspended to the outcome of Brexit. "EU curd and UK cheddar markets are firm but continued uncertainty related to Brexit has seen UK warehouses full of stock to avoid any post-Brexit risks," Glanbia warned. "EU butter demand is quiet in anticipation of Brexit outcome, spring flush and consumer sentiment," the company added.

Butter for Japan

There is good news from Japan, which has opened a quota of 7,000t of butter imports. Skimmed milk powder, too, should see price recovery after the end of EU intervention sales, according to Glanbia.

However, global economic growth forecasts have been revised down, especially because of the Chinese slowdown caused by the trade war between the country and the US.

"While GDP growth has slowed, lack of domestic production and low stocks mean import demand from China is expected to continue to grow in 2019," Glanbia expects.

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