With oil prices now riding on a three-year high and the prospect of further hikes to come, the mood music for world milk markets should take on a correspondingly positive perspective during the period ahead.
By: Richard Halleron
Throw in the impact of the drought conditions now impacting on New Zealand plus the growth in China’s dairy import requirements and it’s hard not to conclude that Irish farmgate milk prices will remain at sustainable levels over the coming months.
There is a well-proven link between oil and global milk prices.
In essence, as the demand for crude increases, so does the ability of countries with oil-based economies to buy dairy products. And this is particularly the case in the Middle East and Sub-Saharan Africa.
In the past Ireland has particularly benefited from these trends. LacPatrick, for example, is a market leader in many African markets, where instantised milk powders are concerned. And let’s hope this continues to be the case well into the future.
The only fly in the ointment, where world markets are concerned, is the current overhang of EU intervention stocks. And these are substantial.
Meanwhile, the race to take Ireland’s milk industry out of the world’s commodity markets continues apace. The development of new sports nutrition offerings and processors’ ability to produce high-quality powders for use in a growing range of infant milk formula offerings are extremely positive stories for the dairy industry as a whole.
But, as the recent experience of Lactalis so readily confirms, complacency can have a catastrophic impact on any food business.
The past week has seen the French processor recall 12 million boxes of baby milk powder in a growing salmonella scandal. That’s a lot of milk powder!
A number of law suits have already been taken out against the business, which has committed to paying compensation in all cases where consumption of the company’s milk powder has led to young children picking up salmonella infections.
The good news is that Ireland’s food industry continues to enjoy a green, clean image in countries around the world. And Irish farmers are very much responsible for making all of this a reality.
The only downside is the fact that these very same producers do not get a price for their produce, which is commensurate with the investment they have put into their businesses over many years.
All of this will have to change, however, as the EU’s farm support budget comes under real pressure in the wake of Brexit and the growing pressure on Brussels to invest in the infrastructure that will be required to keep all aspects of Europe’s economy on track.