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Independent.ie

Friday 9 December 2016

Processors hold prices in volatile milk market

Declan O'Brien

Published 22/04/2015 | 02:30

Milk prices are holding in March
Milk prices are holding in March

All the main dairy processors are holding milk prices for March supplies.

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In a welcome boost for dairy farmers, Dairygold, Lakelands, Kerry, Aurivo and Arrabawn all confirmed that their March milk prices remain unchanged.

Kerry and Dairygold are holding on a base of 30c/l (including VAT), while Lakelands remained on 30.53c/l, Aurivo on 31.9c/l and Arrabawn on 32.05c/l. Lisavaird held on a base of 31.64c/l, while Tipperary Co-op is paying 30.5c/l.

Last week Glanbia Ingredients Ireland (GII) announced that it was holding its base milk price for March, April and May at 30.5c/l, albeit with the support of Glanbia Co-op.

GII actually cut its base price to 29.5c/l for March. However, Glanbia Co-op stated that it would support the base at 30.5c/l for the three months "in the absence of any significant unforeseen circumstances."

The GII move could put pressure on all processors to hold prices to May at least. There were suggestions that co-ops were preparing to pull prices in April but this may not now be an option given the continuing battle to hold suppliers in the post-quota era.

The last two months has seen significant movement of suppliers between dairies, particularly across the south, with milk price and contract conditions being cited by dairy farmers as the main reasons for changing processors.

Struggle

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However, despite the competition for supply, some commentators maintained that dairies could struggle to hold prices through the peak supply months of April and May given the current weakness of dairy markets.

Last week the Global Dairy Trade (GDT) index fell by 3.6pc, undermining the recovery which had taken place over the previous two months.

Industry insiders attributed the overall weakening in markets to the reluctance of dairy commodity buyers to commit to taking significant stocks.

"Buyers are waiting to see how milk supply trends in Europe develop. They want to see if there are significant volume increases across Holland, Denmark, France and Germany," one source said.

"These traders smell blood at the moment. They know dairy companies have stocks to sell and need to sell for cashflow, and if big quantities come on stream then prices will come back."

The fact that the Chinese are continuing to stand back from buying is adding to the overall uncertainty.

However, it hasn't been all bad news. The Dutch Dairy Board quotes were down only slightly last week. Ornua (formerly the Irish Dairy Board) also held its March price for skim milk powder at €2,150/t and increased its butter quote by €100/t to €3,150/t.

Commenting on the overall stability of the dairy trade, ICMSA deputy president, John Comer, claimed that the volume of product coming on the market was still unknown.

"There has to be serious uncertainty about supply over the coming months and that, in our opinion, is going to be the key determinant," Mr Comer said.

"The only supplier we can see that's definitely increasing supply is the US but even here -and thanks to the drought in California - we're seeing growth slowing to its lowest rate in nine months.

"The USDA has lowered its 2015 US Milk Production forecast down 0.5pc from last month's figure and consequently the year-on-year US growth rate has fallen to 1.9pc from 2.5pc," he said.

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