Cover of MoneyWeek magazine issue no 726

Mario Draghi's big gamble: The only safe European stocks to buy now

22 January 2015 / Issue 726

Everyone has their eyes on Mario Draghi this week. But as Dr Matthew Partridge points out, there’s more to Europe than the European Central Bank boss. Read this week's cover story here.

• What to do if your broker goes bust
• The new technology that will save our pubs
• Surviving deflation and the 'Great Unwinding'

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Merryn Somerset WebbEDITOR'S LETTER

Merryn Somerset Webb

What the milk glut tells us

This week, we look at the milk market in the UK. At first glance, the plight of Britain’s dairy farmers looks like it has been caused by the usual suspects – the supermarkets. But look closer and you see that while their policies might not have helped, the real action is outside their sphere of influence.

Look at a chart of the global milk price and you will see that it peaked at near 35p a litre, then started falling fast into the end of last year. It is now around 20p. That’s a 40% fall and a seven-year low.

Prices haven’t fallen slowly. They have, as one frustrated farmer put it in the Financial Times, “fallen off a cliff edge… we’ve gone from boom to bust in six months”.

Sound familiar? It should. It is exactly what has happened to the oil price. So what’s going on? Our piece looks at the supply-demand mismatch in the market. According to UK-based dairy co-operative Arla Foods, the global milk supply, driven partly by the rising yields from super-intensive farming, is rising at 5% a year, while global demand is rising at just 2%.

But to find out why that imbalance exists, you will need to turn to our interview with Paul Hodges. It is about the slowdown in demand resulting from our changing demographics – and it is about China.

• Read the full editor’s letter here: What the milk glut tells us