Lakeland Dairies warns of a “significant milk price correction” in the coming months

“Unfortunately, this will lead to a significant milk price correction in the coming months. We recognize that this will pose many challenges at the operational level as input costs are likely to remain high for now,” a text message to Lakeland suppliers said today.

“As always, we strive to maximize returns for you, but supply and demand fundamentals are weighing heavily on the market at the moment. We will keep you updated on how the market is developing over the coming months.”

When asked by Farming Independent, the milk processor said: “Lakeland Dairies continues to monitor market developments and keep milk suppliers updated on an ongoing basis.”

Last month Lakeland Dairies maintained its December milk price of 58.85 c/l but warned that global milk supply continued to grow significantly and markets had been very weak in the past quarter.

“Global economic conditions remain uncertain and consumer purchasing power is increasingly being weighed down by inflation and the cost of living, with an enduring impact on purchasing behavior.”

The Lakeland board is “aware that market conditions will change significantly in 2023,” it said.

Late last year, milk commentators said the outlook for the dairy sector was mixed, with milk supplies declining globally and in the EU, but inflation and high prices hurting demand.

It comes after a year of record milk prices in Ireland, but against the backdrop of prices at New Zealand’s Global Dairy Trade (GDT) auctions having been steadily declining since the spring.

However, at the most recent GDT auction, prices rose 3.2 percent compared to last month, with butter posting the highest rise of 6.6 percent.

Anhydrous milk fat is up 4.8 percent, while whole milk powder is up 3.8 percent and buttermilk powder is up 2 percent.

Despite the rise, New Zealand bank ASB said after the auction that its outlook “remains pessimistic for the global economy this year”.

The ASB expects recessions in many of the world’s major economies.

“In particular, we suspect that the risk of a sharp slowdown is being undervalued by the market given the historical experience of previous tightening cycles (where a fall in inflation coincides with a significantly lower level of economic activity and a rise in unemployment). ” it said.

“Weaker global growth weighs negatively on the outlook for consumption and should weigh on demand and commodity prices in general. We are also cautious about the magnitude of the Chinese demand pick-up. China’s economy will stage a comeback in 2023, but forecasters are projecting GDP growth of just around 5 percent, which would mark one of the weakest expansions since 1990.

Chinese WMP production and inventories remain at historic highs, the bank said, “which should prevent demand from picking up too dramatically unless there is a drastic change in momentum.”