Market trends confirm recovery in EU milk prices

The European Commission has published its short-term outlook for arable crops, meat and dairy markets in the EU for 2017-2018. The projections confirm that the reduction in the EU milk supply at the end of 2016 contributed to a significant recovery in farmgate milk prices.
By The Newsroom
Published 15th Mar 2017, 07:06 BST
Updated 24th Mar 2017, 10:40 BST

Exports and domestic demand led to record high prices for butter and a significant price recovery for cheese. By contrast, the skimmed milk powder (SMP) price is expected to remain around current levels given the high stock levels and that the seasonal peak of milk collection is still to come.

Cheese looks set to remain a strong driver for growth within the EU dairy sector. Thanks to good export and domestic demand, together with the reduction in the EU milk supply, cheese prices were back to 2011-2015 historic levels in February 2017, at 2,740 EUR/t for cheddar. In 2016, cheese exports reached 800,000t, 11% above 2015 and, importantly, above the 2013 export level when Russia was the main EU customer.

Shipments to the US remained stable and represented 18% of EU cheese exports. The main increases were registered to Japan, Saudi Arabia, South Korea and Australia. In 2017, cheese exports could increase further by 3%. In 2018, assuming that the Russian import ban is removed, exports could grow by 75,000t.

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This represents 30% only of the 2013 EU exports to Russia. Shipments are not expected to revert to their previous levels because, during the ban, Russia found new suppliers. However, if the ban is not removed, exports could still grow by 25,000t to other destinations.

Low cereal prices were driven by abundant world supply and stocks. By contrast, EU cereal production declined by 5.5% in 2016/2017, following smaller-than-average soft wheat and maize harvests. This should result in a slowdown in EU cereal exports. The EU rapeseed harvest was also below average but, given the large world oilseed supply, this only resulted in a small price surge.

The outlook report confirms that EU cereal production declined by 5.5% in 2016/2017, following smaller-than-average soft wheat and maize harvests. This should result in a slowdown in EU cereal exports, in the context of abundant world supply and low prices. Europe’s rapeseed harvest was also below average but, given the large world oilseed supply, this only resulted in a small price surge.

Meanwhile, EU meat production reached a record level in 2016 but is showing signs of downward adjustments.

Related topics:RussiaAustraliaSouth Korea