EU predicts price recovery for dairy

The European Commission says EU milk supply growth slowed down and EU milk deliveries are expected to be below last year in the second half of 2016. Supported by sustained demand (domestic and worldwide), all dairy product prices are recovering, according to its short-term outlook report for arable crops. The milk price paid to farmers, still very low, is expected to increase in the autumn. The report assumes the Russian import ban will remain until the end of 2017.

Butter prices are back to the back to the 2012-2013 price level, and cheddar is higher than last year at €308/100kg, but still around 15% below previous levels. WMP is now €258 per 100kg, which is the same level as 2014, but this is still 20% below the levels of 2012-2013.

Based on SMP and butter prices, the EU milk price equivalent started rising in May and reached €30/100kg in September, while the EU average raw milk price started increasing in August only to the low level of €26.40 per 100kg. Dairy product prices are more volatile than milk prices and in times of crisis decline faster and deeper, the report says.

The magnitude and duration of the recovery in EU dairy prices remain uncertain, as well as the extent of the milk price recovery, it notes. Rising world import demand for cheese and butter and strong import growth in China, the US, Philippines, Mexico and Russia is influencing world prices as well. Domestic cheese and butter consumption is also helping growth in the EU, offsetting declining liquid milk sales. EU supply has dropped since June and additional reductions are to be expected, and declines in Uruguay, Argentina and Australia have also aided the increase.

However, there are large quantities of SMP in public and private stocks, equivalent to about one-third of EU SMP production, and increased US and New Zealand forecasts may influence prices in the future, it notes.

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