Indications from co-ops have suggested there has been a decrease in returns from dairy markets which are reflected in lower November milk prices. However, IFA dairy chair Tom Phelan has said there are many signs that dairy markets will be tighter and prices firmer into the spring of 2019.

He said: “I believe there are very good reasons to expect a positive start to 2019, and I call on all co-op board members who have yet to meet to decide on November milk prices to make a firm decision to hold them at current levels into spring.”

Supplies

A recent report by Rabobank indicated dairy markets may move quickly upwards and catch buyers unaware in 2019.

It also showed output from the seven biggest export regions was slowing. Phelan said supply was coming back into tune with a steady growth in demand.

He said: “EU supplies in particular will be affected well into spring by weather-related impacts on feed/fodder quantity, quality and cost. The evidence is already there that France, Germany and the Netherlands, which between them account for 46% of EU milk production and 51% of exports, are producing far less milk at year-end, and even for the full year compared to 2017.”

Intervention

He also pointed to recent auctions which have seen a large volume of skim milk powder (SMP) move out of EU interventions. Many commentators had said large stocks of SMP were acting as a depressant on the market.

To date, 303,000t of SMP has been sold out, with 60,500t sold in an auction this week. Just over 102,000t remains in intervention and European Commissioner for Agriculture Phil Hogan has indicated all stocks could be cleared in spring 2019.

Phelan said: “The minimum prices at which intervention SMP is being sold is fast catching up with fresh feed-grade powder prices of over €1,450/t, and without preventing fresh food-grade SMP spot quotes from rising this week to €1,700/t – intervention buying-in levels – for the first time in months.”

Although butterfat prices have eased, butter remains at a historical high of €4,640/t.