Insights
Are we at a long term turning point for milk revenues?
The purpose of this free article is to provide a longer term view on milk production and market developments going forward. The reason is that the dairy market seems to be at a turning point. The conclusion seems justified that the usual cycle of rising milk prices followed by a flood of milk and quickly deteriorating milk prices no longer applies.
Sky high milk price – still no milk
The purpose of this free article is to provide a longer term view on milk production and market developments going forward. The reason is that the dairy market seems to be at a turning point. If we take a closer look at the example of EU milk production in figure 1 below, then the conclusion seems justified that the usual cycle of rising milk prices followed by a flood of milk and quickly deteriorating milk prices no longer applies. The graph clearly shows that except for the post quota phase of growth acceleration in 2015, milk production growth – the red bars – normally strongly correlates positively with milk price levels – the blue line. When milk prices fall, milk production growth comes to a standstill and when milk prices increase then milk production growth accelerates. The second time that this correlation got disrupted started in the second half of 2021 and actually lasts till this day (early August 2022). After May 2021, milk production growth evaporated and eventually turned negative despite milk prices continuing to climb to higher and higher levels.
