Wednesday, 19 January 2022
The outlook for milk production remains subdued despite strong farmgate prices. Latest forecasts for 2022 suggest 0.6% annual growth in milk supplies, equivalent to an additional 1.8bn litres of milk. This follows a low growth year in 2021, with estimated* milk production up by 0.9% for the year.
*Dec-21 data estimated
High input costs, labour shortages and increasing greening requirements are offsetting the impact of what are currently strong milk prices. With no relief in sight on cost inflation, at least for the first half of this year, there is little incentive for farmers to drive for higher milk yields.
Favourable weather through the spring peaks could bump up supplies slightly, but the overall outlook for feed, fertiliser and energy costs remains bullish, limiting any significant supply response in the short to medium term. Other factors, such as labour availability, shipping delays and environmental requirements, will continue to play a part in how much production growth will take place, although their impacts will be longer term, and are less clear.
The limited increase in milk supplies will continue to support current price levels, with some potential for further increases as demand continues to recover to its pre-pandemic levels. There are, however, some risks of softer demand from further Covid outbreaks or reduced purchasing as buyers use up some of the security stocks held in response to delivery delays.
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