IFA National Dairy Committee Chairman Sean O’Leary has said the 10.8% fall in the average GDT auction price was obviously influenced by speculations of strong production increases in Europe post quota, which may well not materialise as European milk prices are below break-even in most member states.
He said the auction, at 23,000t, saw 42% less product traded than the same auction in 2014, confirming the trend of thin trade experienced outside the auction.
“The disappointing GDT results are symptomatic of the new volatility and the current uncertainty, and are the second negative results after six strongly positive auctions. Coming as they do on the day the post-quota era begins, this price decrease is unfortunate, but I would be slow to over-interpret it,” he said.
“In a milk market outlook report published in early March, the EU Commission predicted a 1 to 1.2% increase in EU milk production in 2015, not a significant increase, with just 8 member states potentially increasing production, and most others either stagnating or reducing output,” he said.
“I think buyers are trying to hedge their bets and influence rising prices in the face of relative uncertainty. I believe they may yet be proven wrong in their expectation of big production increases in Europe where margins are tight and feeding cows to increase output may not make economic sense in the short term at least,” he said.
“I would urge our co-ops to hold their nerve, and to hold milk prices through peak while greater clarity develops as to European dairy dynamics post-quota,” he concluded