Don’t miss this month’s new look Dairy Farmer. Take a look at the digital edition today.
Muller’s latest statement to producers that, after six months of increases, it is to hold its price for March, says it all really. Its change of position reflects its tentative stance, as it readily admits, that it is fearful of supply getting out of kilter with demand.
And that is the nub of it. Unfortunately, just as the monies from the increased milk prices start to filter through to farm accounts, fears are growing that, yet again, the market could overheat and just as prices have rocketed, they could as easily plummet, unless volumes are tempered.
Fundamentally, things have radically changed since Christmas, when the recovery was built on the back of low milk volumes and high demand.
In essence, that buoyancy was supply driven, not demand led, and compared to that market we now have the possibility of more milk with less demand.
Couple that with the fact that end buyers know there will be more milk to come as we edge towards the spring flush, and if they decide to sit on their hands and wait, it can only exacerbate the situation.
So, for the short term, it looks as if the upward march could start to falter, and if futures predictions are right then prices could ease slightly in the second quarter.
No-one wants to see prices heading south, but its unwitting impact may be to steady production and head off the unwelcome hit of a domestic hiatus.
So it is a bit of a Catch 22 whichever way you go, but if it is the violation of the basic law of supply and demand which is causing instability, perhaps we need to be finding a better way of matching the two!