While still early to determine milk price outlook for 2019, there is nothing to suggest “massive volatility in the near term”, according to Dairygold, with more steady prospects likely at present.
Dairygold CEO Jim Woulfe, chief financial officer Michael Harte and chairman John O’ Gorman released the cooperative’s financial results for 2018 in Dublin today, Wednesday, April 10.
Speaking to AgriLand, Woulfe outlined the current market environment and potential issues down the line.
Prospects
“The prospects for milk for this year – OK, quarter one is over at this point in time – we’re seeing global milk supply ease a little bit.”
The CEO said that production in New Zealand is tapering off, while Argentina is also slowing slightly.
“The US isn’t as growth-positive as it was; cow numbers are dropping but yields are performing with genetic improvement.
From a European point of view, what we’re looking at is a more steady state. European peak production between here and July is going to determine this year; it will have a huge influence on it.
“The actual driver of milk price now is going to be the demand side.
“We are concerned about global economic activity. We are looking in the context of what are the signals in the emerging markets in the context of their demand side and it’s a pretty fine line.
“There’s nothing to say there’s massive volatility in the near term. So, no different to what others would have predicted, we see it as more kind of a steady state as we are at this point in time.”
However, the CEO highlighted that the Dairygold board will “consider milk price every month on the month, taking all the parameters into account”.
Brexit challenge
“Brexit is certainly a challenge that is overshadowing the market.
“And in our case, because cheese is an important part of our portfolio – 40% of our milk goes into cheese – so the cheese sentiment will influence our position.
So, directly or indirectly, Brexit will have consequences in how that plays out for us. But, at the same time, what we’d have to say is relative stability is the order of the day.
Woulfe noted that the Ornua Purchase Price Index fell today.
“We observe that clearly – but we’ve to look at our own basket of products and what we’re doing and how it looks forward.
“So, nothing sensational here, in anticipating a relatively stable few months ahead; that’s the prediction – of course all subject to board review on a monthly basis.”
Brexit proofing
With Dairygold currently engaged in three major investments, efforts are ongoing to “Brexit-proof” the co-op.
“Nothing is destined out of those investments for the British market. It’s more global – European or ‘rest of world’,” Woulfe said.
“We’ve created flexibility,” Harte added.