In a global context of average development for climatic conditions, political stability and for the stabilization of economic and financial situation, milk production in the EU and worldwide is expected coming back to former growth. This will bring supplies in a better balance to demand and will reduce volatility. This will lead back dairy commodities to moderate price evolution. In the EU they will move below the high level of the period from May 2013 to January 2014.
For the whole calendar year 2014 the EU milk production is expected to grow by 3% to produce more cheese, butter and powders. The expanding production will enable to bring back commodity stocks to normal volumes; cheese stocks might even be more than normal. Export is likely to reach new historical high; this is needed to keep the market in balance. EU butter prices have to move in line with world market levels. Cheese production, particularly hard and semi-hard, has been expanded as result of increased milk supplies and the lack of sufficient alternatives for milk processing resulting in increasing stocks. No further export is in sight and a recovery of Russian imports do not seem to be likely. However, at the end of the seasonal milk production prices could stabilize at reduced levels. In the first months of 2014 EU milk powder production has been extended and exports have been boosted with prices very much in line with international prices.
Source: text from Erhard Richarts summarized by the Clal team