Last week’s EU average price of €2,390/t for skimmed milk powder (SMP)is another increase in a market that has climbed steadily throughout this year to the point that it is now at a level last seen in 2014. While prices are still some way off the €3,300/t achieved back in 2013, the steady progression throughout this year reflects a solid market.

With the intervention stocks of powder now cleared, buyers are chasing fresh production and as it is with many agricultural commodities, China is a big driver of the global market. Up to the end of September this year, it has taken 102,286t of SMP which is an increase of 52% on the same period in 2018. The next biggest markets are Algeria on 79,296t followed by Indonesia on 64,595t and Philippines on 60,485t.

Overall, the EU exported 762,407t for the first nine months of 2019.

WMP

Sales of whole milk powder (WMP) from the EU are down 15% overall this year, with Oman the largest market on 35,278t to the end of September followed by Algeria in 16,260t.

Butter

Butter volumes have also increased by 28% to 123,981t by the end of September, with the USA the biggest market taking 28,652t, four times as much as the next largest market which is China on 7,679t, then Japan on 6,958t and Saudi Arabia on 6,620t.

The US market for EU butter has been hit with a 25% tariff as a result of the WTO ruling on the Airbus-Boeing dispute and it will be interesting to observe sales there for the rest of this year.

EU cheese exports have also increased marginally to 649,445t up to the end of September. The USA is again the top market on 106,193t and cheese is also subject to the 25% tariff. Japan is also a growing market at 87,109t, with the impact of the free trade agreement which started a tariff reduction process in February this year. Switzerland is next on 47,163t and then South Korea on 38,964t.

Prices

Butter prices remain down 20% on the year, though at €3,700t it is a small improvement on the previous week of €3,650t. Cheese prices were back marginally to €3,140t last week and SMP was trading at €2,390t.

Average dairy prices from the latest GDT auction in New Zealand shot up almost 4%, with milk powder prices rising strongly.

The latest rise in the benchmark dairy index was led by higher prices for both WMP and SMP.

WMP prices improved 4% this week close to $3,255/t (€2,940/t) – a six-month high for the key dairy commodity produced in New Zealand.

At the same time, the price of SMP in New Zealand has mirrored recent developments in Europe. SMP prices jumped 7% at this week’s GDT auction to hit $2,925/t (€2,640/t), which is the highest price level for New Zealand-made SMP in five years.

Production

After several months of decline, German milk production returned to growth in September. The latest figures from Eurostat show the German dairy farmers pumped out a little over 2.5bn litres of milk for the month of September, which is up 1.3% on the same month last year.

However, it must be remembered that continental Europe experienced a significant drought last summer, which hurt production on many farms. As such, this year’s milk production figures must be judged in that light.

The September milk collections bring German milk production for the first nine months of 2019 to a cumulative 23.8bn litres, which is slightly down (0.3%) on the same period last year. Germany is the largest milk producing member state in the EU and as such it has a major bearing on market sentiment.

The Irish dairy industry is going through uncharted waters this year with the ongoing Brexit issue and the WTO ruling in the Boeing-Airbus dispute which has resulted in the US imposing a 25% tariff on Irish butter and cheese exports to the US.

Butter prices decreased by half from the unprecedented and arguably unsustainable levels of the preceding two years, while commodity prices for skim milk powder rallied steadily for the first time since the market crisis of 2015-2016, with EU intervention stocks now cleared and increaased buyer activity for fresh product. (See Figure 3).

With such market volatility accepted as “the new norm”, geo-political obstacles to manoeuvre and sustainability stories omnipresent in media headlines, the importance of highlighting the unique attributes of Ireland’s dairy industry and our food producing practices to both current and potential consumers will play a pivotal role in ensuring its sustainable commercial success into the future.

Much has been written and discoursed about the need to diversify, be that by way of new products and solutions or developing routes to new and emerging markets. Introducing Irish dairy produce and our unique method of dairy farming to a wider audience has the dual purpose of lessening our reliance on heretofore traditional markets and showcasing our produce to a new consumer.

Sustainability

The topic of sustainability can be an emotive one, in part owing to its subjectivity; what people, organisations and cultures deem “sustainable” can differ and for that reason, providing producers, processers and consumers with clear, transparent guidelines and points of reference which are internationally accredited and independently audited, is one of the many unique selling points for Irish dairy.

Origin Green, Ireland’s food and drink sustainability programme mutually developed by Bord Bia and industry, provides a blueprint for just that. Each week, approximately 800 farms are audited with an acute focus placed on traceability, herd welfare and environmental issues. Dairy processing sites which are members of Origin Green are measured and independently audited on their sourcing of raw materials, manufacturing processes, operations and social sustainability.

This collaboration between farmers, processors and Bord Bia’s Quality Assurance infrastructure allows our dairy industry to demonstrate sustainable food production, as well as offering a key point of differentiation for our exporting organisations and ultimately, reassurance for both our domestic and global consumers.