European Milk Production Up, Pressuring Global Prices

It doesn’t seem like it was too long ago when quota was lifted from Europe’s dairy industry. That was eight months ago, and today European milk production continues to climb. October production was 8.1% higher than the region’s three-year average. Nick Buyse of FCStone says the increase in EU milk production post quota will keep global dairy prices from rallying. In addition, he says decline in production by the U.S. or New Zealand is cancelled out by increased production in Europe because all of the excess milk in that region must be exported.

Here’s the breakdown of production increase by country according to FCStone:

• Germany’s October production was up 3.3% compared to October 2014 and up 4.7% on the three-year average.
• France’s October production increased by 2.9% year-over-year and is now 4.2% ahead of the October three-year average.
• UK’s October production was unchanged compared to last year, but is up 5.2% on the three-year average.
• Dutch milk production continues to make big gains on last year, up 11.4% on October 2014 and up 10.7% on the three-year average.  
• Ireland’s production increased 26.7% year-over-year in October and 23.5% on the three-year average.
• Poland’s production was 3.3% higher in October than they a year earlier and was up 6.2% on the three-year average.
• Denmark’s production also increased in October, up 6.6% compared to last year, and 5.7% ahead of the three-year average for October.

In addition, the biggest importer of European milk is now out of the picture impacting U.S. exports, according to Buyse.

“Russia typically bought about 25,000 mt of cheese per month from the EU,” he says.  “So the bottom line is that more production out of Europe will need to make its way into cutting into the U.S. exports market share.”