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Reduction in EU milk supply edges prices up

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Reduction in EU milk supply edges prices up

Milk cows

(BRUSSELS) - A reduction in the EU milk supply at the end of 2016 contributed to a significant recovery in EU milk prices, says a report on the short-term outlook for arable crops, olive oil, meat and dairy markets in the EU.

The European Commission report, which covers the outlook in the EU for 2017-2018, shows exports and domestic demand leading to record high prices for butter and a significant price recovery for cheese.

In contrast, the price for skimmed milk powder (SMP) is expected to remain around current levels given the high stock levels and that the seasonal peak of milk collection is still to come.

Low cereal prices were driven by abundant world supply and stocks. By contrast, EU cereal production declined by 5.5% in 2016/2017, following smaller-than-average soft wheat and maize harvests. This should result in a slowdown in EU cereal exports, says the report.

EU rapeseed harvest was also below average but, given the large world oilseed supply, this only resulted in a small price surge.

EU sugar prices are catching up with high world prices.

As for olive oil, low 2016/2017 production (13% below average) together with low stock levels resulted in higher prices.

EU meat production reached a record level in 2016 but is showing signs of downward adjustments. Sustained pig meat exports to China facilitated a recovery in the EU price. Continued good beef exports held EU price decreases in check. The production of sheep meat is growing at a slower rate, on the back of lower prices.

Short-term Outlook for EU agricultural markets in 2017 and 2018

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