EU dairy prices continue to be firm according to the IFA’s latest market update however it also says that there are fears in the dairy market of increased supply post quota abolition.

The IFA says EU average dairy commodity prices have been increasing steadily since mid-January.

Over that period, it says butter prices rose by €420/t or 15%, SMP by €320/t or 17%, WMP by €340 or 15%, Cheddar cheese by €220/t or 7%, and whey powder by €80/t or 8.5%.

Spot quotes are also strong, according to the IFA’s update with Kempten (German) butter quotes up €600/t since mid December to €3,300/t, PZ (Dutch) food grade SMP quotes up €520/t, WMP up €630/t over the same period.

Indeed, it says spot milk quotes from the Netherlands, as reported to the EU Milk Market Observatory (EU MMO) have increased by 28% from €27/100kg at the end of the year to €34.5/100kg on March 1.

However, the IFA says the actual dairy trade is reported to be thin, and there is a real fear or expectation that the end of quotas will lead to greater supply/demand imbalance at least in the EU market.

It says returns from a reasonably representative Irish mix of commodity at EU average prices have increased correspondingly to just under 36c/L before processing costs.

This is equivalent to a 3.78c/L increase, and were it to be representative of what Irish co-ops are currently getting it would certainly justify current milk prices at least, the IFA update says.

While concerns are being expressed over what impact the end of quotas will have on EU milk output from April, and therefore on supply/demand balance, the IFA says the fact remains that the EU output continues to ease, and the international trends outside of Europe are also down – with the exception of the US.

However it does say that with EU prices improving (Friesland Campina have increased milk prices by nearly €4 per 100kg in the last two months), the weather outlook good, and the expectation that an extended payment term may be made available to over quota farmers have all fed into the fear some have of a major increase in EU milk production past April 1.