Scorching Heat Across Europe, Inflicting Pressure on Milk Production Could Push Prices Up.

Scorching heat and drought-like conditions have prevailed in most parts of Europe in the past week. In France, temperatures have reached highs of 35 degrees centigrade for over a week and 40 degrees in the southwest. In Germany, most dairy farm states have experienced extremely high temperatures where the 90-day precipitation fell below 50 per cent of normal.

In many parts of the UK, temperatures have been higher, with meteorologists calling the weather pattern a heatwave over the past week- the mercury reading has reached 37 degrees in south-eastern England. In the Iberian Peninsula, temperatures have been the highest, with temperatures of more than 40 degrees recorded over the past 10 days. Even in the Nordic area, some countries have seen higher seasonal temperatures coupled with low precipitation in recent weeks and days.

The continued higher temperatures and drier than normal conditions in large parts of western Europe haven’t bode well for grass and many food crops. Grass growth across most dairy farms on the back of the adverse weather has been poor: dairy farms are recording below-normal grass growth rates.

In Great Britain, almost all dairy farms are recording below 33 kilograms of Dry Matter per hectare per day (-16.9) kilogram Dry Matter per hectare per day from the 3-year average. Farmers have had to increase feed supplements and move any dry or young stock off the grazing area, with some culling poor-quality cows earlier than planned. As a result, the UK milk production over June fell 2% YoY to 1.27 million litres.

Conditions have stifled cow comfort and further hastened seasonal milk declines. EU collections in all major milk-producing countries are behind year-ago levels and are unlikely to pick up to make up for the losses in previous months. Production in May stood at 13.23 million mt, 1% below the 13.46 million mt in the same month in 2021. Although collections went up in recent months in the eastern part of the continent, current conditions have put production on seasonal decline levels.

The EEX European Liquid Milk Index has seen month-on-month increases since April. It recorded another gain from June to July to €51.64 per 100kg. In Germany, it saw a (+1.62) MoM increase to €50.10 per 100kg. The Irish price also rose (+€1.75) to €53.03 per 100kg. The benchmark price in Denmark recorded the strongest increase, up (+€4.02) to €50.94 per 100kg.

Variables within the dairy market in Europe currently point to lower milk production and higher dairy commodity prices at least in the near term.