Milk prices set to drop below 30c/l warn traders
Another sharp drop in the Global Dairy Trade (GDT) auction last week has prompted fears that April milk prices are set to fall below 30c/l.
While Glanbia's commitment to pay suppliers 30.5c/l up to the end of March is likely to put a floor in the market for March milk, processors claimed that they were already subsidising milk prices by 2c/l before the latest fall in international prices.
The 10.8pc fall last Wednesday came as markets reacted to a smaller than predicted drop in New Zealand output on the back of drought conditions there in recent months.
Chinese buyers have also stayed out of the market as newly established mega farms in that region ramp up supplies faster than expected.
This prolonged absence of the Chinese has resulted in an additional 4.4bn litres of milk looking for new markets, according to Rabobank's dairy analyst Kevin Bellamy.
The EU dairy industry has also resigned itself to the fact that the Russian ban is unlikely to be lifted within the next 12 months.
This will leave an additional 1.1bn litres of milk looking for alternative market outlets.
While EU supplies are predicted to be down for the first half of 2015 with producers striving to minimise superlevy fines, Mr Bellamy expects volumes to rise in the latter half of the year. US production is falling, but at a slow rate.
However, Mr Bellamy is still confident that Rabobank's prediction that demand will continue to outstrip supply will hold true for the medium to long term, and he believes that prices are set to rise again in the latter half of 2015.
"It's going to be a difficult year, there's no doubt about that," he said. "But the long term story is still good, and Irish farmers can take some comfort from the fact that they are among the most efficient in Europe."
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