Don’t miss this month’s new look Dairy Farmer. Take a look at the digital edition today.
The fact some processors are promising further price rises right through to the end of the year shows their take on the market and their desire to secure supplies. So much so that some are paying good money for those who can squeeze out a little extra.
Over the past year we have all discovered what the downside of volatility looks like, so producers can be forgiven for feeling a little anxious about the enduring nature of any upturn. Reassuringly, market analysts predict a good few months with that bellwether of European futures remaining strong till January at least.
But it’s not all plain sailing. Prices are high at a time when the euro is strengthening against the dollar, which means Europe, which has exported a lot of dairy product in recent months, might find exchange rates start to dampen trade.
In addition, better prices inevitably foster extra production and the supply and demand equation could easily be upset. And if retailers start to bump up butter prices, consumers may start to vote with their feet.
The worst scenario is if any curbing in demand comes at a time when milk volumes start to increase in the EU and especially New Zealand, where milk prices are also at a level which stimulates volume. Then the big worry is that demand falls off just as we slam headlong into our spring flush.
This all points up the unpredictability of the industry, and even today’s better returns do little to erase the memory of the pain of recent times. This is highly pertinent to some producers, who now face a new decision as to whether to fix their prices going forward.
Certainly some of the prices being talked about look tempting, and we may get further clues when Muller launches shortly. But ultimately, it is a commercial decision based on insight and personal judgment.
Trouble is second guessing the market has never been a precise art!