Farm Ireland
Independent.ie

Sunday 22 October 2017

Dairies hold milk price at 30.5c/l as outlook improves

The outlook for the dairy sector has improved
The outlook for the dairy sector has improved
Declan O'Brien

Declan O'Brien

Glanbia Ingredients Ireland (GII) and Aurivo have held their January milk price at 30.5c/l (including VAT).

In addition, the board of Glanbia Co-op has decided to provide support, if necessary, so that the base February and March manufacturing milk price for farmers who have signed a milk supply agreement (MSA) will not fall below 30.5c/l including VAT.

The GII move is a major boost for dairy farmers and comes as the IFA and ICMSA have stepped up the pressure on dairy processors to hold milk prices for January on the back of more positive international dairy market sentiment.

GII has also announced its fifth index-linked fixed milk price scheme. The scheme will be available to suppliers who have signed a milk supply agreement and will run from April 2015 to March 2018.

At standard constituents and including VAT the base milk price under the scheme is set at 32.61c/l. At average supplier constituents the base milk price equates to 34.5c/l, Glanbia sources noted.

GII's decision reflects a more positive mood in the dairy sector generally. A worsening drought in New Zealand has resulted in a serious reduction in that country's dairy output for the 2014/15 season, while EU milk production has fallen sharply since Christmas due to the milk quota situation.

International markets have also been helped by stronger demand from Chinese and other Asian buyers.

Although the Irish Dairy Board (IDB) cut its purchasing price index for January from 94.4 to 93, it held butter and skim milk powder (SMP) prices at €2,850/t and €1,950/t respectively, and industry sources predicted that IDB will be under pressure to raise the price paid for butter in February since it is currently trading for a close to €3,200/t on European markets.

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"Fonterra have announced a 1pc fall in North Island supplies, and now predict a 3.3pc fall in overall milk solids output for 2014/15, which would be equivalent to a 10pc downturn in volume," IFA dairy chairman Sean O'Leary pointed out.

"Tonnages put through the GDT [Global Dairy Trade] auctions have come down accordingly, and the average price has increased by 17pc in the last four events.

"Some of the main product prices have increased much more significantly, with butter prices up 50pc and WMP [whole milk powder] up 29pc since November/December last," he added.

Recovery

Mr O'Leary pointed out that EU butter prices had increased by €130/t, SMP by €210/t, WMP by €150/t, cheddar by €120/t and whey powder by €80/t.

"In this context, it is vital that co-ops would sustain current milk prices at least to help farmers manage their business over the next number of months while the recovery takes hold," he said.

Pat McCormack of the ICMSA agreed that the outlook for milk prices was positive. He observed that Dutch dairy quotations for butter/SMP were now at 33.8c/l and WMP was at 34.8c/l, price levels last seen in July/August 2014 when dairy farmers in Ireland were receiving close to 35c/l.

"Currency movements have also been a major factor and ICMSA estimate that the gain is about 3.8c/l based on a comparison between current rates and the exchange rates applying in the first week of November," Mr McCormack said.

Meanwhile, Midlands and Northwest MEP Mairead McGuinness has called on the EU Commission to allow farmers to pay this year's superlevy fine - which is expected to be in the region of €50m - in installments over a period of three to five years.

Ms McGuinness called on Agriculture Commissioner Phil Hogan to be "flexible and pragmatic" on the issue, and to "signal his intention to address this pressing problem immediately."

Indo Farming