The rollercoaster year on dairy commodity price continued this week, with another potential pothole in the road that could even turn into a road block depending on what way it goes.
Early in the week we have seen gas supplies to Poland and Bulgaria cut off by Russia, with the obvious impacts for their economies and prices.
The early signs are that prices have jumped 20% already.
The outlook doesn’t improve in the short term.
Poland produces a decent bit of skim milk powder (estimates suggest in the order of 10 to 15% of EU totals), so what will happen in these countries and the milk processors if the driers have to be turned off? Will it make more cheese? Will it transport milk elsewhere? Will the closing gas tap widen to other countries?
All of this at a time when food security is high on the agenda for lots of organisations and countries.
Food export bans are getting more and more common and this isn’t going to end today or tomorrow.
The World Bank said this week it expects the food and fuel price shocks to last until the end of 2024.
This could take on a life of its own if the gas tap is cut off from other countries.
We talk about it the agribusiness podcast this week and our own Phelim O’Neill and Anne Finnegan have been writing about various related issues in this week’s print edition.
Phelim and Adam talk about Argentina’s beef ban increase and the impact on global beef prices asking if Irish beef prices will rise even more?
Anne Finnegan has a piece on Indonesia’s palm oil ban, which is also indirectly dairy related.
Fat-filled milk powder that Aurivo and Lakeland and other co-ops have a play in often use oils like this and it is also used in some processed cheese.
Where will this issue go? Will the likes of Aurivo and Lakeland secure enough supplies to keep producing? To what degree can other oils fil the gap? Will the price be? Will nations in Africa and beyond who buy the product have the money to carry on buying?
The turbulence is clear and what falls out depends on so many indirectly related factors
As a result of this what will happen the price of butter? Will it be used instead of oil? What will happen the price of butter on the shop shelf?
The price of butter probably hasn’t gone up enough yet on the shop shelf to reflect the market increase and now this oil shortage on top?
Time will tell, but the turbulence is clear and what falls out depends on so many indirectly related factors. Interesting times if nothing else.
The butter and oil markets could be more interesting than the Munster hurling championship if Limerick continue to dominate as they have been doing