Ornua Highlights Climate Risks Affecting Global Milk Supply Stability
Irish dairy cooperative Ornua has issued a warning regarding the potential impact of extreme climate conditions on the global milk supply. Recent heatwaves across continental Europe are expected to disrupt raw milk flows in key EU member states, which could hinder the sector's current supply expansion. Additionally, the cooperative highlighted the increasing likelihood of a 'super' El Niño weather event, posing systemic challenges for upcoming production seasons. This phenomenon may limit milk supply growth in sensitive export regions, particularly in New Zealand's pasture systems and the southern United States.
Despite these environmental challenges, Ornua reports that global milk collections remain stable for now, with no immediate signs of significant contraction. In May, global milk volumes increased by approximately 2.5%, supported by robust output in major dairy regions. This resilience, combined with a seasonal slowdown in corporate procurement and holiday closures, creates potential for further price reductions in major commodities through July and August. Consequently, significant market price growth is expected to be limited for the second half of the year.
The report also notes a recent decline in European spot values for cheese, butter, and skim milk powder (SMP) compared to the previous month, reflecting the current volume buffer. Across the EU-27, April collections rose by 2.8%, with May volumes projected to increase by another 2.7%, driven by production spikes in Germany (+6.3%), Poland (+3.8%), and the Netherlands (+2.6%). In contrast, Irish production decreased by 3.5% in April, with only limited recovery expected due to a high historical baseline.
On the demand side, international trade figures indicate strong performance in the first four months of the year, with global milk equivalent exports rising by 7% year-to-date. However, Ornua's analysts caution that these figures may reflect aggressive commercial 'front-loading' by major buyers rather than sustained structural growth. This buying pattern, along with consumer cost-of-living pressures, has led to increased buyer caution in the market, while European exporters face competition from US trade desks.
Looking ahead to the third and fourth quarters, Ornua anticipates that weaker seasonal supply profiles and a typical autumn increase in manufacturing demand should provide support for dairy values starting in September. While current powder futures, spot milk, and cream indices show positive technical signs, the overall market equilibrium remains highly sensitive to weather conditions. In the absence of immediate severe weather-driven supply shocks or sudden macroeconomic demand spikes, international dairy prices are expected to remain stable near current levels.
