Wholesale markets have weakened significantly in the past week, with supplies far outstripping demand. The forced closure of foodservice outlets had the effect of eliminating a large market for dairy products, leaving many processors with severely reduced outlets for their product. Markets are still adjusting to the current situation, creating widely diverging trends week on week.
In the immediate aftermath of foodservice outlets closing, the spike in retail demand helped to soak up some of the excess milk supplies. As such, some of the ‘homeless’ milk volumes could find buyers although at reduced prices.
In the past week, however, liquid processors have reported a drop off in retail demand.
The three main reasons for this drop off are:
shoppers are making fewer trips to supermarkets
consumers are using up purchases made in previous weeks
limits on purchases in retailers
Lower ingredients demand from businesses supplying into fast food outlets, biscuit manufacturers, and chilled convenience foods, for example, has also increased the amount of milk without an end destination. Those manufacturers suppling into these markets will therefore have had excess milk supplies. While some of this milk will continue to be processed into storable products, there is a reluctance by manufacturers to build stocks when there are currently limited buyers and no certainty on when some markets will reopen.
In the last week there have been a number of dairy farmers in the UK that were told to dispose of their milk as the processors were up to capacity and could not take any more volume. This week the dairy sector has asked the government for help to get through this crisis in the industry.
Most of our dairy supply partners have got a tough few months ahead of them and we are starting to see price increases come through almost on a daily basis.