Irish Issues

The market yesterday didn't start as quiet as we would have expected. Ok, the cheese market didn't show any signals of waking up, but the butter market was extra active and even the powder market is showing significantly more activity compared to the previous days. The activity doesn't indicate a bouncing market, it seems more likely we will test the bottom of the market in the days that will follow. 

Looking at the market from a news perspective, we didn't see any major changes or updates that should indicate. We do see that the farmer protests are spreading across the EU. France, Belgium and Germany have seen major strikes and in Holland, we have a political party in our government just to represent our angry farmers (although they would claim a bigger representation). Regulation is pushing farmers to rethink their future and whether farming remains sustainable. It does seem that corporations are trying to please as many farmers as possible. RFC went up with their contract price to 46ct giving farmers more incentive to maximize milk output. We would expect other coops to follow the RFC example.

Irish Milk: A Startup Issue

Speaking to partners located in Ireland today we see they struggle with the continental price changes. As their season didn't start yet and the ground is (very very very) wet, their forecast for 2024 milk production is on the low side. In addition, some indicate that they are still running behind on 2023 contracts so pressure from the Irish producers isn't to be expected until Q2. Ireland isn't unaffected by the Green Deal movements and production restrictions are not only a continental problem. The question is how hard it will hit this year's production, some partners think that Irish milk will fall again v.s. last year, but others keep believing in the growth scenario. So from a milk supply view, their is not much to worry about today, but from Q2 onward the expectations are a bit more diverse

Irish Cheddar: A Supply Issue

Irish cheddar is a big export product that usually finds a lot of offtake in the UK, the EU continent and on the export markets. But since last year the EU is losing some of its export customers to US producers as they have been selling cheddar well below EU prices. In September/October last year, this even pushed the EU cheddar price below that of the Gouda / Edam. But now we hear that on the EU continent, the Irish producers are experiencing some competition from NZ producers as well. With Asia's demand being down and Middle East and African demand being targetted by the US, EU buyers are getting offered some Fonterra products. With cheddar output expected to be steady in Ireland in the new season, more pressure on pricing is to be expected.

Irish Butter: A Demand Issue

Irish butter has been the favourite of consumers in the US, in Germany and frankly on the world stage. Grass-fed butter has a healthier sound and has been popular for years. The offtake has been growing year on year in the previous decade. But now that consumers have to be a bit more picky in their purchases, it seems the grass-fed stamp doesn't represent as much value anymore. We hear sales of Irish butter on the continent are hit had more and more consumers are switching to German or French butter if it is equally or cheaper priced. The expected production peak in Ireland has led to lower trades in our partner network with Irish butter trading as low as € 4900 fca NL for February and € 5150 average for Q3.

Irish Competition: A Polish Issue

With the quality of Polish butter improving in the previous year we now see very little price difference between Polish and Irish products. Especially Irish winter product doesn't seem to have any premium v.s. Polish butter. Continental buyers would be able to switch between Irish or Polish butter without much problems, therefor the Polish price setting in the next weeks might be an issue for the Irish producers. Yesterday it seemed more pressure became visible for the Polish market with prices trading below € 5000 there for the first time this year. And with more pressure mounting some Polish partners indicated that the bottom isn't in yet. We therefore think that a polish price correction could impact the demand for Irish butter even more.