Farm Ireland

Monday 24 October 2016

Milk supplies surge but global prices drop to six-year low

Every 1c/l reduction costs producers a total of €8m

Martin Ryan

Published 08/07/2015 | 02:30

ICMSA deputy president Pat McCormack
ICMSA deputy president Pat McCormack

Milk supplies continue to surge by up to 18pc, despite international prices falling to a six year low as the Global Dairy Trade (GDT) index fell another 6pc last week.

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But dairy processors have been accused of failing to pass on the full benefit of the added value returns from the market in recent milk cheques.

Following a meeting with Ornua (Irish Dairy Board) ICMSA deputy president, Pat McCormack claimed that their May price index of 98.5 was "equivalent to in excess of 29c/l at farm level", even after allowing for a "relatively high" processing margin.

"This indicates that any suggestion that co-ops are supporting or cross-subsidising milk price at levels below 29c/l is simply not correct," he said ahead of next week's meetings to fix the June milk price.

Every 1c/l reduction on the June milk price will cost producers almost €8m as production continues to soar on farms.

CSO figures for milk intake show that in May 863.7m/l was supplied to processors, compared to 733m/l for May 2014, and the trend is continuing at the major processors in June, with a 18pc increase at Glanbia and a 16pc jump at Dairygold.

However, the GDT auction on Wednesday fell for the eighth consecutive time last week, bringing the index to 634 - less than half the level it was at in spring 2014.

Ornua CEO, Kevin Lane claimed that returns to Irish producers in 2015 are being supported by up to 20pc from the added value element of Irish dairy sales, such as the Kerrygold label. Irish cheese and butter is retailing at double above the price level of local equivalents in both the United States and Germany.

ICOS dairy policy executive, TJ Flanagan, remained hopeful that a turnaround in the market could take place relatively quickly.

"This is what happened in 2009 and 2012 and I see no reason why this could not be repeated again.

"Once Chinese buyers believe that the market is about to turn, they may well start to actively re-engage with the world's dairy supply companies," he said.

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