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Dairy recovery prospects pushed back as global factors continue to hit market

Several experts have pushed recovery prospects back further in 2016


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Prospects for when recovery in dairy farmer fortunes may begin have been pushed back further in the year, with a raft of global factors keeping a lid on prices.

 

The milk sector faced a significant downturn throughout last year and farmers are increasingly being forced to sell up across the UK. Kevin Bellamy, senior dairy analyst at Rabobank, said it was a very difficult time for producers across Europe.

 

He suggested there were factors which could bring about recovery later in the year, but said the majority of issues with the potential to keep a lid on prices had manifested themselves, creating a continued difficult situation.

 

"There is still a lot of milk around," he said. "Probably, some of those issues which risk price downside have come [to be true]. That has pushed recovery back further into the year.

 

"As EU production creeps to its peak there is more product going into intervention. The US dollar is strong so emerging markets have weak currencies and this means dairy is more expensive [for them]."

 

But he suggested there were factors which could turn industry fortunes going forward.

 

"China will come back into the market this year. I think there is a lot of consolidation happening in farming. We are on a very deep and very low price cycle," Mr Bellamy added.

 

The suggestions about the timescale for a dairy market recovery echoed claims made in Arla’s 2015 financial results. The firm said it expected dairy markets to turn for the better ’toward the end of 2016’.

 

And the results came shortly before Arla Foods amba announced it would hold its on-account price for March at 21.81ppl.

 

Ash Amirahmadi, head of milk and member services at Arla Foods UK, said: “The ongoing imbalance between conventional milk supply and demand is putting continued pressure on the on-farm economy.

 

"The significant increase in production across northern Europe is resulting in higher cheese and ingredients stocks, resulting in sustained downward pressure on the markets."


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