Irish milk prices are currently among the lowest in Europe, with payment per litre falling from one of the highest July, 2022 prices in Europe to one of the lowest in July 2023.
And the August milk price report from the Dutch dairy organisation, ZuivelNL, rubs it in, drawing attention to the continuing pressure on milk prices in Ireland.
“This mainly seemed to be related to price pressure over the past period in international dairy markets, in particular, those for commodities relevant to the Irish dairy sector”, said the compilers of the report.
The EU Commission’s report for July showed Irish milk prices had fallen 33% in a year, with only Lithuanian farmers suffering a similar price decline.
Prices fell by 30-32% in Latvia, Sweden, and Belgium. They fell by 25-28% in Denmark, the Netherlands, and Germany. Prices fell by 10-15% in Poland, Estonia, the Czech Republic, and Romania. Malta, Greece and Slovenia saw farmgate milk prices fall by 8-9%. Prices fell by only 2-6% in Slovakia, Hungary, Austria, and Bulgaria. However, July prices were higher in 2023 than in 2022 in seven member states. The gain was 4-6% in Finland, France, and Italy, but 11-14% in Cyprus, Spain and Portugal, and an impressive 20% in Croatia.
The ZuivelNL August report wasn’t all bad news, it said EU butter prices stabilised in August, having fallen in June and July. This is attributed to a reduced EU supply of fresh butter, plus improved demand. And EU skimmed milk prices recovered some lost ground in the second half of September, having fallen almost continuously since mid-June. Some revival in demand for skim milk powder was also noted, a welcome change in markets which relied most of the year on the lack of growth in the global milk supply to support prices.
With dairy purchases by China, Southeast Asia and Japan slower than previous years, albeit with Algeria and Mexico taking advantage of weaker prices, market analysts believe that global milk production will have to fall further before a meaningful increase in commodity prices arrives.
It was the return of Chinese buyers that lifted recent Global Dairy Trade auction prices 4.6%, off three-and-a-half-year lows. Nevertheless, dairy market experts at Rabobank have warned it could be 2024 or 2025 before Chinese dairy imports recover, with their economy set back by a real estate crisis, and deteriorating demographics. There is a strong correlation between China’s economic growth and dairy imports.
In the first half of this year, China’s imports of dairy products have been down 15.2% year-on-year. China imported less whole milk powder than it did in any August since 2016. Skim milk powder imports had been going stronger, but fell to 36% short of 2022 volumes last month.
That’s bad news for New Zealand’s already struggling dairy industry, heavily dependent on Chinese demand. Hit by wet weather in the North Island, and by slashed milk prices, the country’s highly indebted dairy farms are shouldering increased interest payments on top of other cost increases.
Perhaps to give them some hope, Rabobank’s senior agriculture analyst, Emma Higgins, has held out the prospect of a price whiplash, if markets get nervous due to global dairy demand recovering, even as global production falls. The El Niño weather pattern returning and disrupting milk production in the southern hemisphere could play into that trend.
Milk from the major dairy exporters (including the EU) will grow only 0.3% year-on-year, predicts Rabobank, having earlier estimated 0.5%, but now noting reductions in most key global regions, including the US, EU, and New Zealand. Into 2024, output is expected to climb by only 0.4%. These figures compare with 1.6% annual average gain from 2010 to 2020.
A price whiplash would also be welcomed by Irish farmers. The ZuivelNL August milk price report shows them back in the old familiar position of propping up the league table of prices at 15 milk processors that ZuivelNL monitors.
The average price of the 15 was €41.64 for 100kg of standard milk, VAT excluded. The two lowest prices were Dairygold’s €34.14 and Tirlan’s €34.22. Fourth from the bottom was Kerry Agribusiness, with a price of €38.51.
The best August price in the EU was €50.34 paid by Valio in Finland. A bit further afield, Emmi in Switzerland paid €75.35. At the other end of the scale, the Fonterra price of €28.19 summed up the tough times for New Zealand dairy farmers.
