Are world markets starting to strengthen?

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While there are some indications that the world’s dairy markets are starting to strengthen, this should not be taken as a sign that a sustained recovery is on the way, according to ICOS dairy policy executive T J Flanagan.

“We have seen a slight recovery in prices courtesy of the last two Fonterra auctions and the most recent Eurex results,” he said.

“In fact, Eurex butter prices went up by the equivalent of €60 this week. This brings the market back to the levels it was achieving in mid-December last.

“But it would be absolute folly to try and predict future market tends on the back of the recent auction results. What I can say with some certainty is that the recovery, when it does happen, will gather pace quite quickly.”

The ICOS representative confirmed that a key driver for change on international dairy markets will be milk output reductions in either Europe, Oceania or the United States.

“Back in 2012 markets firmed on the back of the terrible summer weather in Europe, which was followed by drought conditions in New Zealand and the US.”

Meanwhile, Lakeland Dairies chief executive Michael Hanley believes that nothing at all can – and should be – read into the latest dairy auction returns.

“It will take until the second half of January to identify any discernible trends on global dairy markets,” he said.

“Yes, the recent upturn in auction prices is good news, up to a point. But the reality is that Irish producer prices are currently insulated from the ravages of the world market place. My concern is that a wall of milk will be produced in Europe over the coming months. And markets will have to be found for all this product.

“During the first eleven months of 2014 EU milk production increased by 6 billion litres. The equivalent figures for New Zealand and the United States were 1 billion and 2 billion litres.

“The EU dairy sector has helped create the current problems. And it is up to Brussels to come forward with a solution that will help resolve these matters.”