The IFA is calling for processors to respond to strengthening dairy markets. Based on EU milk market observatory data, they see potential for a 5c/l increase.

There is no doubt that we are seeing improved market conditions in the dairy sector – both on the demand and supply front.

The sustained period of low prices is causing structural supply constraints which are likely to be long term. On the demand side, we have seen improved demand for both butter and cheese with the powder markets more sluggish – demand is ultimately responding to lower market prices.

However, it may be into the final quarter of the year before the stronger market conditions actually filter down the supply chain.

Dairy farmers, currently producing at or below the costs of production, are rightly demanding an immediate price response. However, there is a responsibility on all to manage expectations.

There remains a number of challenges within the market, mainly low grain prices, Brexit, a turbulent Chinese economy and intervention stocks within the EU.