Brussels Daily
28 Jul 2015


Brussels Daily

–    The 8th meeting of the Milk Market Observatory Economic Board took place on 28 July 2015, with the participation of experts from the various steps in the milk supply chain.   Read about the Milk Market Situation here

DG AGRI presentations and information exchanged during the meeting showed the following.


–    EU milk production was up by 2.7% in May, bringing the cumulative total so far in 2015 to

0.2% above last year’s level. In 13 MS, production in the first 5 months of the year was higher than in 2014. The increase in volume is particularly big in IE, PL, UK, HU, PT & CZ.


–    Average farm gate milk prices approximated 30.5 c/kg in May and a further decrease is expected in June (estimated average around 30.4 c/kg, 9% below the last 5 years’ average). The strongest reductions were reported in the Baltic States, IE, HU, RO & NL. Further price cuts are expected in the months to come. Organic milk prices, representing only a small share of the market, continue to offer better returns to producers.


–    Milk producers are faced with cash flow difficulties and banks have been made more cautious by the non-realisation of recovery prospects announced at the start of the year. Increased cow slaughtering was reported in the Baltic States, SI, SK, DK and the UK.


–    Last week’s situation in FR brought producers, processors and retailers around the Minister’s table.


–    LT has the lowest milk price in the EU, partially due to a malfunctioning of the supply chain, with buying power concentrated in a few hands.


–    Producer organisations called on the Commission to take action, some advocating an increase in dairy intervention prices and financial support to help farmers overcome the situation, other asking for the Commission to propose tools to regulate supply.


–    Dairy product quotations show decreasing trends over the past month for all products (especially whey power) except for Emmental cheese. Gouda & Edam prices are below 2009 levels. On the world market, all prices decreased in the last fortnight, except for US prices for butter and cheddar. Price decreases were particularly strong for milk powder. Concerns were expressed at possible difficulties in oil producing countries traditionally importing dairy products, given decreasing oil returns. On the other hand, recent openings with Iran might bring new possibilities.


–    The assessment of EU stock levels based on a residual approach (production + imports – consumption and exports) confirmed excessive stocks for cheese up to April included (due to increased production and reduced exports), higher SMP stocks and slightly excessive stocks for butter due to the need to process peak milk production and despite dynamic exports. Similar trends are expected for May and June. In the last 2 weeks, 1 176 t SMP have been offered to intervention in LT, PL and BE.


– At world level, milk production increased by some 825 000 t in the first 5 months of the year, mainly due to the US. Latest figures about US milk production in June show a less dynamic increase (+ 0.7%). Milk production is increasing in China, Russia and Belarus. World exports are decreasing, reflecting demand slow down. EU exports of butter and cheese have benefited from the relative absence of US exports. The US confirm their position as nr 1 destination for EU dairy exports, followed by China, Saudi Arabia and Algeria. China considerably reduced its dairy imports, while Japan and South Korea confirmed their dynamic demand.


– EU per capita consumption (retail sales) in the last 5 years (2010-14) increased for cheese, cream and butter, but decreased for milk and yoghurt. Contrary to liquid, flavoured and fruited yoghurt, per capita consumption of plain yoghurt slightly increased. In 2014, total cheese consumption increased by 1.6% (butter by 3.7%), mainly driven by upward industry use.


–    Overall market sentiment remains bearish, with no improvement in sight for the near future. The necessary supply side correction has not materialised so far.


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