There are encouraging signs of recovery in the dairy market but there is still a long road to travel before the ’dreadful’ times of the past two years are behind us, according to Farming Minister George Eustice.
Farming Minister George Eustice has welcomed signs of an upturn in the dairy markets but has warned farmers the EU’s intervention policy is likely to slow recovery.
There have been a number of encouraging announcements on milk price from milk processors recently, including A and B price rises from First Milk and a decision by Dairy Crest to reverse plans for a July price cut.
Speaking at the Dairy UK dinner in London on Wednesday he said, while it was too early to make ’rash predictions’ on long-term recovery, the signs were encouraging.
He said: “It has been a dreadful two years. Production has continued to rise even though prices have been low. We have had a drop in demand in China and disruption in the market from Russia.
“But there are now signs things are turning the corner.
"I don’t want to make rash predictions but we have now seen production starting to ease back in many countries, including here in the UK, where it has dropped by 4 per cent, in most other EU countries and in New Zealand.
“This means we can expect to enter a better equilibrium between supply and demand.
"It is not going to change overnight because during this difficult period we have put a huge amount of dairy product into intervention.
“There is a lot in storage and that has to come back out on to the market in the next couple of years, which may mean the recovery in process is more sluggish than we would like."
“But it is does feel like things are starting to change and it is absolutely essential when we do start to recover we start to plan for the next downturn and the next bout of volatility."
“That is why in Defra at the moment we are doing a huge amount of work to establish a new futures market in dairy - we have to establish it in good times rather than bad times.”
Dairy UK chairman David Dobbin echoed Mr Eustice’s sentiments.
He said: "Thankfully we are starting to see signs the markets are stabilising, with milk production in Europe slowing and the ongoing intervention of milk powders tightening the market.
"We are now past the northern European peak milk production period and, with British milk production falling year-on-year and seasonally, we are starting to see encouraging signs.
"Farmgate prices we hope have it the bottom. It is too early, however, to call it a market recovery.
"There are still significant amounts of stocks held in private and public hands and while milk production is slowing global milk output is still running at an historic high."