Archive: Dairy prices unlikely to see any recovery until second half of 2015

Published 27 November 14

This page has been archived and no longer updated. more info

Since August, farmgate milk prices in Britain have been subject to numerous cuts as the imbalance between supply and demand in global dairy markets has impacted on the returns available from the market. Most recently, Arla have announced a cut to its member’s milk price for December. This latest cut is likely to lead to questions over when the current round of price cuts may end.

The unfortunate news is that, in the absence of a significant reduction in available supplies or a return of demand from key importers, the downward trend in milk pricing is likely to continue for the first half of 2015. The period of falling wholesale prices, which are currently impacting on farmgate milk prices, is the result of the build-up of excess global dairy stocks.

Milk production in the key exporting countries has increased by just under 8 billion litres in the first nine months of 2014, compared to the same period in 2013. For the Northern Hemisphere, this production situation is unlikely to reverse itself dramatically in the first half of 2015 as the current expansion phase has some months to run. Cow numbers in the main producing countries (EU and US) are up on previous year figures, setting the scene for milk production to continue on its current path going into the spring. The reductions in milk prices are likely to start a slowing of production, but only if margins are reduced sufficiently for farmers to look to reduce cow numbers and/or yields through a reduction of supplementary feeding. In GB, in spring, with both price reductions and seasonal deductions coming into play, more pressure to reduce production through the summer and autumn (barring any weather events) will come into play.

Recent forecasts of Russian import demand for 2015 suggest little improvement on current levels in 2015. The return of the Chinese to the markets is viewed by many dairy analysts as critical to when dairy commodity markets start to stabalise, but when this is likely to happen remains uncertain.

 Global milk supply growth