The increase in prices in the latest Global Dairy Trade (GDT) auction are unlikely to herald a change in the dairy market and a return to increased farmgate prices.
The index for the New Zealand-based auction rose 3.2 per cent in the latest sale last week, but that followed a 4.7 per cent drop in the early April sale, with prices similar to where they were at the end of 2020.
The most recent increase was driven by a 7 per cent rise in skimmed milk powder, with Cheddar prices up 5.7 per cent and butter 4.9 per cent higher. These increases were tempered by a 1 per cent rise in whole milk powder.
Dairy market analyst Chris Walkland said: The increase may have changed negative sentiments a little, but it is too early to even say that the market has turned a corner.
The rise in skimmed milk powder prices did not benefit the EU and UK powder prices, with no rises in the Arla milk powder price. The rise in the GDT may also have been a one-off, with buyers seeking to top up stocks.
There was a similar rise in the index in early February, with falls in the four following sales.
Mr Walkland added that two factors are key to the global milk market. One was Chinese demand and the other was EU milk supply.
Chinese dairy stocks and production are relatively strong, so the wet and cold spring in Europe may have more of an influence in reducing supplies and tightening markets.
A reduction in Irish production would be significant.
Irelands milk output in February was at 361.3 million litres, 1.7 per cent less than in February 2022 according to Irish government figures, with a further drop expected in March and April.
Dairy analysts at Rabobank downgraded production expectations for 2023 in their latest market outlook, with exports supported by lower product prices than in 2022.
The bank also pointed to China as being a key factor this year. Latest figures from the country showed the economy grew at 4.5 per cent in the first three months of the year faster than many had expected, with household consumption up 10.6 per cent as people got back to more normal shopping patterns after the pandemic.
