Short-term milk outlook is 'pessimistic'
Published 05/04/2016 | 02:30
The country's dairy co-ops will need to continue to to support milk prices or they may weaken further, with the short-term outlook remaining pessimistic, an analyst has warned.
Low farmgate prices throughout Europe mean production growth will slow as farmers focus more on cost-savings than expansion, according to the latest research report from Rabobank.
However, Rabobank's dairy strategist Kevin Bellamy warns that while growth will level off, production levels will not fall so the world market will have to find a new pricing balance.
"The short-term outlook is not great," he said.
"Returns from commodity markets where much of the Irish production heads is still only around 26c/l meaning that, either cooperative boards will need to continue to dip into reserves to support prices, or there is room for further weakening of prices at the farm-gate," said Mr Bellamy.
However, he said they believe that co-op support will be "less possible" during 2016.
Rabobank signals that throughout 2016 the slowing production growth will be matched by slow but steady consumption growth in most export regions.
It pinpoints that this will reduce the surpluses available for export onto the global market and, when matched with renewed import demand from China and South-East Asia, will lead to upward pressure on prices in 2017.