Dry weather hits milk production across Europe. Could boost milk prices

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Stock photo
Ciaran Moran

Ciaran Moran

Due to unfavourable weather conditions, the expected increase in EU milk production this year has been lower than anticipated.

This could lead to higher milk prices in the 2nd half of 2018, according to a latest outlook by the European Commission

In the first quarter of 2018, EU milk collection was more than 2pc higher than last year.

Despite the large dairy herd, production growth was slightly less than expected. The main reasons were the cold and wet weather conditions delaying grass growth in early spring, followed by a lack of precipitation in some Member States.

At the peak of the milk season (April-June), the availability and quality of pastures is key not only for providing good pasture but also for building up forage resources for the following months.

After a late start, grass productivity in France is now back to normal in the main milk producing regions. Ireland and the UK, are still catching up in this respect.

Source: European Commission.
Source: European Commission.

In addition, Denmark, and wider areas around the Baltic Sea are now affected by relatively higher seasonal temperatures and a lack of precipitation.

On the other hand, farmers were able to use more feed concentrates thanks to higher margins at the end of 2017 and the expected higher milk price in the second half of the year, thus partly compensating for lower forage availability.

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Ireland, and to some extent also France, were most affected, the Commission said.

In addition, milk collection in the Netherlands is down from last year, as constraints on phosphate emissions phased in.

By contrast, collections went up significantly in Germany, Italy, Poland, Spain and Belgium in the first 4 months of the year.

The increased collections in the EU, but also globally, as we approached the peak of the season, led to a drop in the EU raw milk price to around EUR 33/100kg in April.

This was 2pc below the previous year’s price and 1pc lower than the last 5-year average.

According to the outlook, the EU milk price is expected to increase later this year. This follows the seasonal pattern and the current rise in dairy product prices, driven by EU and global demand.

The EU milk price equivalent, based on skimmed milk powder (SMP) and butter prices levelled out in January and then rose by 20pc to €36/100kg in June, driven mainly by the butter price surge and to a lesser extent by the recovery in the SMP price.

The butter market remains undersupplied, despite the increased availability of milk in Europe. This is due to very low stocks and lower milk collection in France, the Netherlands and Ireland, three of the EU’s main butter producers.

In addition, butter production in Germany went down. It is expected that the price of SMP will continue its current upward trend and then stabilise in the course of the year.

In 2018, on the basis of the dairy herd evolution, the milk price and weather conditions, EU milk collection is expected to increase by 1.2pc compared with 2017.

Online Editors