Dairy Market outlook with Glanbia Ireland Business Intelligence Manager, Paula O’ Dwyer

Dairy product prices are slightly firmer in recent weeks to recover lost value over peak.

Dairy product prices have firmed in recent weeks to recover value lost over peak.

Following the Summer lull, seasonal demand kicked-in with buyers covering requirements to year-end.

Tighter weekly milk volumes and lower milk solids in Germany, France and UK year-on-year have provided a degree of support to EU dairy product prices. Higher feed and input costs are likely impacting.

Global supply chain disruptions continue. Logistics challenges remain a significant constraint globally and include a lack of container availability and substantially higher costs all of which are putting upward pressure on prices as margins are squeezed.

A shortage of truck drivers in the UK estimated at 100,000 lorry drivers is impacting UK-wide distribution and has seen stock build up at key distribution hubs.

China’s July imports continued to surge. Stock levels are reported to be elevated but high domestic milk prices as well as recent port shutdowns and lockdowns in parts of China are likely to maintain a focus on supply chain security and buffer stocks. There is a degree of demand pull forward as opposed to demand growth that needs to be monitored. Rabobank expect a slowdown in import demand from China to begin in the second half of 2021 and could weigh on global dairy commodity prices.

Brexit developments continue. The UK Government has announced an extension to the implementation of UK import controls for EU goods including pre-notification of agri-food imports and the new requirements for Export Health Certificates. Trade flows were impacted in the first half of 2021 with UK dairy imports reported 12% lower and UK dairy exports 11% lower. On cheese it appears the UK is becoming increasingly self-sufficient.

EU foodservice demand has been more muted than anticipated. The global spread of the Delta COVID-19 variant has put a quick recovery from the pandemic on pause as cases rise in many parts of the world. Changes to lifestyle and consumer buying behavior are looking unlikely to revert to pre-pandemic levels, adding to the current market volatility.

First Published: 27 September 2021