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Now may be the time for European food manufacturers to lock into a long-term pricing deal for dairy ingredients, Greenfields Ireland advises.
Belfast-based ingredients trader Greenfields Ireland is advising food manufacturers in Europe to lock into a fixed-price deal for dairy ingredients before prices rise later this year.
European dairy market prices are currently at a 10-year low because the European milk supply is currently exceeding demand, largely due to the abolition of milk quotas that previously put a cap on how much milk dairy farmers were allowed to produce, Greenfields explained. And as free-market forces have sent dairy-commodity prices tumbling, now may be the “perfect time” for food manufacturers to consider a fixed-price, long-term deal for dairy ingredients.
“Do this today, and it will be possible to benefit from low prices and insulate your business from the extreme price volatility that’s been a characteristic of the European dairy ingredients market over the past decade,” said Ian Thomas, managing director of Greenfields Ingredients, the U.K. division of Greenfields Ireland.
The window to take advantage of the low prices may not remain open long, Thomas cautions. Greenfields expects the prices will begin to climb again in the second half of 2016, due in part to the European Commission buying up butter to prop up in the market, as it has already done with skimmed milk powder.
“For companies in the bakery, confectionery, and ready-meals categories, who often use large volumes of dairy ingredients, this is an opportunity that’s simply too good to miss,” said Thomas. “Wait too long, however, and it could be too late. Intervention by the European Commission will take excess suppliers of milk out of the market, and product prices will soon start to creep up.”
Greenfields Ireland offers a range of pricing models for food manufacturers to fix their dairy-commodity prices.
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