EU Move to Cheese Could Drop Class III Prices
The European commission recently released their thoughts on likely trends for the dairy economy in the EU. The European dairy industry has experienced strong exports this year that has given strength to prices and ongoing support. As a result milk production in the EU has increased over the last couple of months. Couple that with production in New Zealand picking up over the past couple of months and the U.S. continuing to increase production 1.5 to 2% gains over last year’s numbers and the European commission is worried about potential threats to their current export market later this year.
In strategizing for greatest future returns many manufacturers in the EU consider cheese to net the most bang for their buck and an increase in cheese production is likely to take place. This is not good news for a market that is already oversupplied with barrel cheese, and poses a significant threat to Class III markets moving forward.
On the other hand butter markets have opportunities to lighten some inventory and increase in price as milkfat moves to cheese.