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EU milk prices show recovery amid lower milk production

September 11, 2020

1 mins read

In the nine-week period to 26th August 2020, Mintec EU milk prices rose by 4% to EUR 475/MT, attributed to a hot summer, as lower concentrate feeding was necessary reducing milk production.

Milk production expected to decline, which saw EU milk prices rise by +1.5%, between Jan-Jun 2020 year-on-year (y-o-y). EU milk prices rose due to EU member countries easing lockdowns. As a result, foodservice sector has seen a resumption in demand combined with higher retail buying, which has sustained demand.

Although the Private Storage Aid (PSA) scheme has helped remove some of the surplus milk on the market, this has been further supported by strong EU exports to China, EU’s largest dairy importer. EU dairy exports are considerably attractive on the international market, due to low inflation in the Eurozone weighing on prices. This has seen milk exports to China increase +15% between Jan-Jun 2020, compared to the same period last year. As economic activity has resumed in China and other Asian countries, this will be price supportive for EU milk prices.

However, a lingering uncertainty remains from “second wave” surges of coronavirus, which may cause foodservice closures across much of Europe. This will mean a slower-than anticipated recovery in foodservice channels, coupled with reduced tourism travel impacting restaurant demand through much of 2021. If second localised lockdowns start to increase, the foodservice sector may see a drop in demand in the short-term, which may see EU milk prices fall.

Zaki Hussain
Zaki Hussain

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