There is “significant upside potential in the second half of 2023” for European milk prices, according to latest analysis from the Amsterdam-headquartered commodity intelligence platform, Vesper.
But Jasper Endlich, market intelligence analyst with Vesper, has also warned that this will not be “as spectacular as we’ve seen throughout 2021 and 2022 because those levels of volatility will likely not be seen again”.
Endlich said prices have come down “from their all-time highs over the past couple years” for a number of reasons, but primarily because of supply and demand issues.
“In 2021 and 2022 prices shot up to incredible heights that we’ve never seen before but that trend has changed – we’ve entered into a buyer’s market.
“Prices started decreasing towards the end of 2022. Generally speaking, the trends that changed in 2022 are still being followed today – but it won’t be forever. There’s a temporary increase in supply but we don’t expect this to stay,” Endlich said.
He said currently there is “enough product in all of the different markets to meet all of the demand” and that the market will in turn “stay subdued” during the first half of 2023.
According to the Vesper analyst when European milk prices hit 60c/L it was “hard for the dairy commodity producers to keep producing at profitable levels”.
“Milk prices are going down because of supply and demand – there was a very high payout to farmers and we don’t expect to see that again this year.
“We will see two things; milk deliveries are likely to be lower in Europe and because of that, payout prices will likely decrease to around 40c/kg in Europe. Generally speaking, the 40c is where the new milk price will land for this year.
“This will lower the profitability of farmers and that will lower milk production in the months to come. At the same time we will see prices in dairy bottom out – we’re already quite close towards the bottom and the potential to go lower than we currently are is limited this year,” Endlich added.
However, he also said at Bord Bia’s annual Dairy Markets Seminar in Co. Kildare earlier this week that the “expectation is that dairy prices will rebound” to around historical prices.
“Milk prices will increase throughout the months to come,” Endlich forecast.