It seems that the negative predictions of world-famous analysts will not come true. It was expected that the global dairy market would start recovery no earlier than late 2016 or early 2017, but prices began to strengthen in June, after the long crisis period.

One reason for this was the slowdown in the growth of milk production. For example, in the EU for the first four months of the year milk yield increased by 4.6%, while the figure for April growth was only 1.6% compared to the same month of the previous year. Since the beginning of this year, the growth in milk production was: 5.6% – in January, 10% – in February and 5.4% – in March. That is, despite the seasonal factor, some even large manufacturers reduced production compared with the previous month. The May data is not yet available, but it is assumed that the rate of increase in yields has slowed. The estimates for the first two weeks of June show that milk deliveries has declined in Britain, France and Germany. In general, the production has also slown down worldwide: the decline is being observed in South America and Oceania.

The impact of the regulatory instruments used in Europe is also noteworthy. Interventions have actively swept the surplus of SMP from the market. After the ceiling of the specified level of intervention was reached (218 thousand tons), the product was being removed through tender purchases.

Moreover, in the last days of June it was reported that the recent proposal made by the European Commissioner for Agriculture to increase the ceiling of the intervension purchases up to 350 thousand tons was officially approved This arrangement entered into force on June 30, and this means that in the coming weeks the fixed price (1698 EUR/t) purchases of SMP will resume. This factor will certainly affect the situation.

It is worth mentioning that Germany – one of the major players in the dairy market – recently did not use the intervention purchases, which may also be a kind of sign of the dairy market recovery.

Apart from the intervention, dairy products (SMP, butter, cheese) are removed from the market by the private storage aid mechanism, PSA, which means that the product is stored in warehouses during a prescribed period and remains the property of the seller, who receives compensation considering the costs of storage, changes of quality indicators and possible changes in product prices.

The combination of these factors significantly influenced the development of the market. And, generally speaking, the crisis cannot last for too long, any economy would not be capable to withstand such a prolonged recession. Seems that the dairy market really comes to life.