Farmers have been warned to expect a "bumpy ride" when it comes to milk supplies and global demand.

According to Susie Stannard, lead analyst dairy with the Agricultural and Horticultural Development Board (AHDB), current trends suggest that "milk supplies are running too far ahead of what global demand can absorb".

Stannard said that dairy product inventories are growing globally, "which means that even after production comes under control commodity prices will take some time to recover".

This was well-illustrated in the latest Global Dairy Trade (GDT) index, which fell for the sixth time in a row earlier this week.

Cheddar took the biggest hit, falling by 6.6%, reflecting a price of €3,864/mt while butter also took a notable stumble, falling by 4.3% for a price of €5,533/mt.

Milk price

According to Stannard, there could potentially be some upside when weaker commodity prices feed through to retail because "this could stimulate demand".

She added: "Particularly in butter there is pent-up consumer and industrial demand as consumers and manufacturers have had to substitute more desirable butter for cheaper vegetable oils".

Stannard highlighted that the EU is the biggest global milk producer - of the exporting nations - and makes up almost half (48%) of milk production from the big six exporters. 

But she said that the EU overall has seen very low levels of growth and in some cases a decline in production, with the exception of some markets including Ireland and Poland.

However, according to Stannard, this was "outweighed by decline in other larger milk producers" including France, Germany, and The Netherlands.

She blames the low production chiefly on the impact of the bluetongue virus in these regions, which hit milk production quite substantially.

"This has skewed European milk supplies so there has been less milk in half one and more in half two [of the year]," the AHDB lead analyst said.

Margin pressures

However she also pointed to the latest Eurostat figures for September, which showed that European milk production was up by 6.0% year-on-year.

But Stannard has warned that "margin pressures" are set to emerge in the coming months, with European milk prices already falling.

She has also said that while the threat of bluentongue may have receded, the potential for other diseases to slow down milk production is still on the horizon.

"On balance, this points to supplies in the largest milk producing regions putting pressure on the global outlook well into 2026 at which point equilibrium will resume," Stannard added.