The “significant correction” in milk prices in the European Union (EU) has now passed, according to a new report from Rabobank today (Tuesday, June 6).
The bank said that most dairy companies in milk producing countries lowered their base price in April to “near 45/100kg or lower”.
“In the months ahead we expect more modest revisions in pay-out prices.
“The provisional EU-27 farmgate milk price for April is estimated at 48.84/100kg – which is still 5.6% higher than April 2022, ” Rabobank stated in the report.
Agriland‘s latest milk price tracker, produced in association with the Irish Creamery Milk Suppliers’ Association (ICMSA), also showed that the downward trend in milk prices in Ireland continued in April.
This was in line with dairy commodity prices in the EU which dropped from early March to mid-May.
According to the latest Rabobank Global Dairy Quarterly report at the peak of the spring flush, spot dairy commodity prices remained stable or modestly increased.
“At the same time consumer data indicated a less positive market signal as market volumes were under inflationary pressure.
“From a bullish perspective the start of the spring flush was negatively impacted by poor weather conditions across Europe,” the bank stated.
Production levels
One key trend identified in the latest report is that while dairy farmers in the EU have experienced lower milk prices, this has not led to a reduction in milk production levels.
“It is likely that milk supply growth will hinge on a possible drought in northwest Europe.
“If a drought materialises, farmers will face roughage shortages and or additional costs to purchase feed,” Rabobank warned.
Deliveries
The latest Rabobank report also outlined that EU27 and UK milk deliveries were up 0.6% year on year in quarter one this year – this is lower than the previously anticipated 1.2%.
“Milk volumes declined especially in France by 1.7%, Italy by 3% and Spain by 1.4% due to drought conditions.
“At the same time these countries experience lower margin gains throughout last year,” the bank stated.
However it has revised its outlook for EU quarter two milk deliveries to 0.5% year-on-year – previously it was 1.2%.
“North west Europe experienced a late start to the pasture season but year-on-year comparisons remain weak,” the bank stated.
For quarter three it also expects milk deliveries in the EU to remain flat year-on-year before declining in quarter four this year.
Meanwhile Rabobank said that while global milk production is still rising it is “losing momentum” and this in turn could stabilise global market prices.
Andres Padilla, senior analyst dairy with Rabobank said: “Some price deflation in dairy could help sustain demand levels in key markets during the second half of 2023.”
According to the bank the cumulative effects of high food inflation over the past 24 months and slowing economies this year has translated into “lower dairy demand” on a global stage.
It also noted that food price inflation continues to be a major factor for European consumers and that “negative year on year retail volumes” confirm that demand remains a concern.