Bakers have been warned to lock in their dairy commodity prices, which are at a 10-year low.
The caution, from leading commodities trader Greenfield Ireland, comes as the European Commission is buying up skimmed milk powder through its Intervention Scheme to prop up the market and is widely expected to extend this measure to butter in the next few weeks.
According to Belfast-based Greenfields Ireland, as soon as a market balance is achieved, prices are almost certain to rise again.
The EU butter price is currently hovering around €2,250 per tonne, down from a high of around €4,500 just three years ago
Ian Thomas, managing director of Greenfields Ingredients, the UK division of Greenfields Ireland, said: “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. Wait too long, however, and it could be too late. Intervention by the European Commission will take excess supplies of milk out of the market, and product prices will soon start to creep up.”
Dairy ingredients are cheap right now because there is too much milk in the market and not enough demand for it. However, according to Thomas, prices will not stay low for long. “Now is the time to consider locking into a long-term pricing model.
“This will give you the assurance of knowing that when prices eventually rise, which we expect them to do in the second half of 2016, the price you pay for your dairy ingredients will be more favourable than that available on the market.”