The outlook for the dairy sector is mixed as global and EU milk supplies are falling, but inflation and high prices are hurting demand, say dairy commentators.
It comes after a year of record milk prices here, but as prices at New Zealand’s Global Dairy Trade (GDT) auctions have been falling steadily since the spring.
ICMSA Dairy Committee Chair Noel Murphy said there is some pressure on “spot prices” but he is confident that all the key underlying elements are still positive and he thinks that the traditional ” early” buying patterns Prices preferred by Far East buyers would be maintained at or just below current prices through the second quarter and through to the peak.
“Actually, there are two factors at play here: the first is the fundamental balance between supply and demand, and we think that looks fine; US production is beating forecasts – as are some EU producers – but there is nothing on the demand horizon to suggest a fundamental imbalance,” he said.
“The pressure on spot prices over the last period does not indicate a trend and we expect Chinese buyers to step in and repair their supplies early in the new year. Prices could go down slightly but we think the market looks solid going into 2023 and we would be fairly confident that ahead of peak production in 2023 the numbers look reasonable.”
Karol Kissane, Senior Executive Dairy at IFA, agreed that there is some downward pressure on future markets for produce through 2023.
“This is most pronounced in EU indices. However, the latest results from SGX (Singapore Exchange) and GDT show prices are firming,” he said.
“The downward pressure in the EU could be as companies try to manage their balance sheets until the end of the year as they don’t want to have large inventories on their books and sell products.
“With reduced global supply, supply and demand fundamentals should support a strong milk price into 2023.”
Mr Kissane also said the US marginally exceeds supply but the EU, New Zealand and Australia lag behind 2021.
“Demand is a bit subdued at the moment, but once China returns to the market, that could change very quickly.”
EU milk exports fell between January and September 2022 for all dairy products, with the major movements being MMP (–15 pcs), butter (–8 pcs), WMP (–20 pcs) and whey powder (–11 pcs) were.
Total EU exports fell by 10 percent in the first nine months of 2022, but the value of these exports is 17 percent higher than in 2021.
New Zealand’s milk production was down 3.2 percent in September 2022 and down 3.7 percent from June to September 2022 compared to the 2021/22 season.
Dairy Industry Ireland’s Conor Mulvihill said last week at the European Dairy Association Congress in Madrid, which discussed EU and global dairy prospects, that it looked like 2022 would be the first year in 13 years that Irish Dairy would not see positive growth and he predicts the only reason Irish dairy would not fall short of 2021 production would be the strong end to the year, driven by good weather and farmers continuing to milk.
He said there were positives and warnings for the global outlook for dairy at the EDA conference, including the CCO of dairy giant Arla Peter Giørtz-Carlsen, who said a lack of clarity around environmental policies across Europe was particularly contributing to delays in investments on the farm and in the factory, which hinders growth.
Giørtz-Carlsen also said the UK is now in recession with food inflation rates at 19 per cent and this would scald demand for all food categories including dairy.
https://www.independent.ie/business/farming/dairy/milk-prices/global-factors-are-crunching-dairy-sector-numbers-as-farmers-prepare-for-mixed-year-ahead-42180636.html Global factors weigh on dairy numbers as farmers brace for a ‘mixed’ year