Viewpoint: Dairy sector faces summer of discontent
Published 27/05/2015 | 02:30
The continuing uncertainty in dairy markets has provoked some nervousness among farmers. While milk prices have escaped a serious drop for April supplies, the outlook for May milk is not as positive.
Industry sources are already suggesting that the ongoing weakness in market sentiment will start to hit farmers' pockets from next month on.
The general consensus is that processors will pull prices by up to 2c/l. Base prices of 28c/l are being talked of.
While anyone who talks down milk prices is accused of doing the processors' bidding, there is very little good news from current market trends.
The latest Global Dairy Trade (GDT) auction was down 2.2pc. Not much, people will argue, but this is the fifth consecutive drop. Meanwhile, the European market remains weak, with Dutch spot prices for milk hitting 18c/l last week.
While the weakness of the euro against both sterling and the US dollar has helped support milk prices to some extent, processors point out that market returns only justify a return of 28c/l to dairy farmers at the moment.
Industry sources point out that demand for dairy products remains flat and has not been helped by Chinese buyers holding off purchasing. In addition, the Russian ban continues to hit the trade.
Given all the negative sentiment it has been suggested that co-op boards are being softened up for a major price cut for May supplies. "Glanbia's raiding of the co-op piggy bank was the only thing that stopped prices being pulled this month," one co-op official said.