MIV’s Holtorf examines the market
During the Berliner Milchforums 2016 in Berlin recently, deputy chairman of the German Dairy Industry Association (MIV) Hans Holtorf, frischli Milchwerke, evaluated the existing market situation as extremely difficult. “Supply and demand is currently out of balance,” he notes. “There are increased milk deliveries in some countries within the European Union, such as Ireland, the Netherlands, Poland and Germany. In other EU countries there has also been stable to increasing production volumes in recent months.”
He says that demand for milk products has faltered on some important international markets. The reasons are varied: the import embargo of Russia, a weak economy of major trading partners, unrest and uncertain market environment and lack of purchasing power due to the low oil prices.
Holtorf thinks the market situation will continue to be difficult in the coming months, because the milk rich months are yet to come and a reduction in milk production by dairy farmers in response to the low milk prices has not happened in Germany and other parts of Europe. Neither New Zealand nor the US are expected to reduce their milk supply significantly in 2016 either.
Exports of German milk and dairy products in 2015 have, according to figures from the Federal Statistical Office, at least in terms of volume been at a relatively stable level of demand in the EU countries. Growth has been in third country destinations, but at lower level.
Despite the aging of the German population, there were some observed increases in per capita consumption last year. In other product segments, sales in the trade went down by almost 20%. Cheese is still the front-runner, as over 50% of German milk is processed into cheese.
Milk prices paid to the farmers will keep falling in 2016, and MIV expects no increase in prices in the coming months. Rather, a number of dairies have already used up reserves in 2015 and are now facing some severe cuts in payments.
An exception has been the organic sector, although it is only a small proportion of the total milk amount produced in Germany. The price of organic milk has increased due to high demand.
Brussels began a €420 million programme last summer in motion to support the dairy sector. In Germany over €70 million were paid out, not only for the dairy farmers. “Compared with previous payments in similar crisis situations is only a drop in the ocean,” says Holtorf.
The market is supported by intervention buying of milk powder and it can be assumed that in the EU, intervention will continue to be used, which the MIV is grateful for, he notes.
The MIV cannot predict when the situation on the market will be better, Holtorf says. The German milk price depends heavily on the international competition within and outside the EU. It is clear that a real improvement can only come from a change in the markets.
“As demand in the near future will not increase, supply must sink to stabilise the market. Because it was and is certain: it will remain volatile,” says the MIV deputy chairman.
Volatile also includes a rise in prices. And perhaps the latest import figures China at least are the first indication that encouraged by low prices on the world market demand is already rising again for milk and dairy products.
