What does 2018 hold for milk prices?
2017 was a relatively good year for dairy farmers, as the average dairy farm income is expected to exceed €90,000.
Given the difficulties that the market faced in 2016, this year’s expected income is €40,000 higher than the figure generated last year; making it the highest ever year for dairy farm incomes.
After a record-breaking year for dairy farm returns, the milk price outlook for 2018 suggests that prices will contract slightly.
Speaking at yesterday’s Teagasc Annual Review and Outlook 2018, Teagasc’s Dr. Emma Dillon said: “We imagine that milk supply growth will likely run ahead of demand and we’ll see a weakening in butter prices. In terms of skimmed milk powder prices, they will still remain very low.”
Looking to 2018, Dillon said that stocks of skimmed milk powder currently in intervention (360,000t) are an issue and it’s causing some degree of uncertainty for prices going forward.
Touching on global supply trends, she said that both the EU and the US is expected to increase production by 2%.
Overall, we’d expect that the global milk supply growth will run ahead of demand. And, the issue of EU intervention stocks is a real question mark over what happens next.
“In an Irish context, we’d expect Irish milk prices to move downwards in 2018 and we’re forecasting an average fall of about 10% to about 32-33c/L.
“The increases in fat and protein and the improvements that Irish dairy farmers are making may help insulate them against these price effects.”
The Teagasc representative added that butter prices are expected to come down to somewhere around €4,400/t or below and cheddar prices will be reliant on exchange rate movements.
Prices and returns
She continued: “In terms of 2018, with a continued increase in cow numbers and milk yields, we’d expect that national production would continue to increase at around 4%.
Costs will be broadly similar and, for that reason, we would imagine that on a c/L basis they will remain relatively stable at about 21.5c/L.
However, some of the costs associated with milk production are expected to increase.
However, for the most part, she predicts that these additional costs will be diluted by additional milk supply growth. On a net margin basis, she said, that the relatively small changes in input prices and the decline in milk price will lead to a fall off in net margin.
“We’d image that would fall to about €1,400/ha or 11.8c/L.”