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Saturday 21 January 2017

Dairies deliver optimistic call on spring milk returns

Published 14/12/2010 | 05:00

Senior Irish dairy sector officials have forecast a stable milk price from the start of next year, with most predicting that returns to farmers will hold at a base of 28-30c/l.

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Positive developments on both the supply front and currency exchange rates have left processors far more upbeat about the prospects for dairy markets through the first quarter of the New Year.

However, there was general agreement that markets remained volatile, and none of those contacted by the Farming Independent were willing to speculate on milk price beyond March.

"In this economic climate visibility is limited. You can look four months ahead at most," said Kerry Group's Frank Hayes.

However, he said the omens for the market were positive and he admitted to being "optimistic" for the first quarter of next year.

"Markets have remained stable. There was a dip in butter price but buying looks stable and people are optimistic, we're optimistic," Mr Hayes added.

The Kerry Group spokesman said the fundamentals of the market looked good and there was no evidence of any "strong negative sentiment" among buyers.

He said fears of a sharp lift in supplies out of North America had been undermined by the higher cost of cereals.

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The decline in the value of the euro on world currency markets had also boosted the competitiveness of EU dairy exports, Mr Hayes added.

This view was shared by Arrabawn's chief executive, Conor Ryan, who pointed out that the New Zealand dollar had appreciated in value by more than 30pc against the euro over the past 12 months.

This had eaten into the competitive advantage of New Zealand dairy produce on global markets.

"A year ago, the euro was worth NZ$2.55-2.56. Today, it's trading around NZ$1.76," Mr Ryan said.

"A lot of things have gone right for us because dairy prices should have fallen in August," he maintained.

Favour

"The Russian drought, the flooding in Pakistan, the weaker euro, the New Zealand drought and heavy rains in Australia have all worked in our favour," Mr Ryan said.

Although European milk production has soared through the back end of the year, with output in Britain up for the first time in almost 20 years, Mr Ryan said EU companies had been able to offload stocks on buoyant world markets.

"The drought in New Zealand is also getting serious. They had predicted a 5pc increase in milk output. That won't happen now," Mr Ryan said.

Town of Monaghan chief executive Vincent Gilhawley questioned whether New Zealand would be in a position to deliver on stocks they had sold forward given the severity of the drought.

Commenting on the current strength of dairy markets, he said the old dictum that strong oil prices were always reflected in good dairy prices seemed to be holding true once more.

"Oil is back up near US$90 a barrel and that's always a good sign for dairy markets," Mr Gilhawley said.

He said Algeria had also put tenders out for skim milk powder and whole milk powder.

"We're facing into the first quarter of next year a hell of a lot more optimistic than we were this time last year," Mr Gilhawley said.

Irish Independent