Erhard Richarts is Chairman and CEO of IFE (Institute of Food Economics) in Kiel, Germany, where they continue to deliver neutral market and policy analysis for the dairy market. The expert dairy analyst was head of ZMP, Germany, before setting up IFE, where his analysis and predictions are always worth a closer look.
He said there will be some increase in milk production but the historic increase of 4.6% in milk deliveries in 2014 is not likely, as it is improbable that last year’s weather will be repeated and milk prices are 20-25% lower. The estimate of 149m tonnes will be another historical record and if very favourable conditions do come this year EU may produce 150m tonnes.
On the world scene, all major exporting countries produced an extra 9m tonnes of milk last year with the aid of favourable growing conditions and high milk prices. As in Europe, weaker prices and less favourable growing conditions are leading to lower growth in supply. In the US, milk supply increased in early winter but have slowed down, New Zealand has survived the drought but supply will not increase by very much if at all and Australia has a moderate increase.
He said butter and milk powder prices are expected to stay at present low levels for the next couple of months, but there some possibility of a recovery around the middle of this year. Cheese prices will not fluctuate like last year and are expected to recover.
Milk prices paid to farmers might increase in the second half of this year but are not likely to reach 2013 or 2014 levels.
Demand from importing countries will continue to grow, EU will benefit from volatility in currency, but Russia will not be back in the market anytime soon.
China and Russia will hold key positions. If the surplus stock imported by China in 2014 is cleared they will be back in the market, but the devaluation of the rouble will be a bigger problem for Russian imports.