UFU welcomes upbeat EU analysis of dairy price and market prospects

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12 June 2014

Chairman of the Ulster Farmers’ Union Dairy Committee, Jonathan Moore has welcomed the market forecasts made by the Economic Board of the EU Commission's recently established European Milk Market Observatory (MMO) at their recent first meeting in Brussels.  The meeting discussed the latest market data and assessed the short to medium term dairy market situation.

Speaking on the issue, Jonathan Moore said, "The MMO was launched back in April 2014 with the aim of increasing transparency and providing accurate market data, so that actors of the milk supply chain can take well-informed business decisions and help the sector adapt to the new environment post quotas.

“Following months of falling dairy commodity prices, we are very encouraged by the MMO Board’s first report and by the EU’s optimism about milk prices and market prospects going forward.  Since the beginning of the year we have seen a downward pressure on milk prices, with increased supplies in the main global milk producing regions and speculation in the industry regarding the impact of the abolition of quota in 2015. However, European milk output has been boosted this year by a combination of factors, including high farmgate prices for milk, favourable weather conditions and the forthcoming expiry of the EU's milk quota system.
 
“The latest MMO analysis of the market situation indicates that the favourable spring weather conditions will see European milk production increase by as much as 8m tonnes in 2014 compared to 2013.  Yet, crucially, the MMO expect that strong market conditions will allow this extra milk to be absorbed without negative consequences for prices. In addition, with the seasonal peak output now passed in both the EU and the US, the MMO is optimistic that milk prices are likely to find a new balance at reasonably high levels in the second half of this year.  Also, according to the MMO some EU skimmed milk powder (SMP) stocks have built up, but most of them are committed and world demand remains strong.  Furthermore, butter stocks are at normal levels, which will cover expected demand for the remainder of 2014.”
 
Jonathon concluded, "With milk quota being abolished in April 2015 and the current superlevy debates in Europe, many industry experts have been speculating as to the impact on markets of the removal of these production controls.  According to the MMO’s recent report, there has been an increase in investment in the dairy sector in the run up to quota abolition and processing capacity should increase accordingly. The European Commission are expecting the impact of quota abolition to be ‘limited’, in their market assessment report to the MMO meeting, and they are also expecting growing cheese production to absorb most of the additional milk in the market. The Commission believe that it will take at least another 10 years before actual EU milk deliveries again reach the final-year quota levels of 153.8m tonnes and as far as pricing is concerned, the UFU are encouraged to hear that post 2015 the EU are optimistic about milk price prospects.”
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