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.
However, the same official predicted that should European milk output fall back in response to a reduction in prices, then buyers could quickly step back in and resume buying.
Reacting to suggestions that milk prices will be cut in June, ICMSA deputy president Pat McCormack said there was little justification for such action.
"The Ornua [formerly Irish Dairy Board] Purchasing Price Index fell 1.1pc point - which is the equivalent of less than one third of a cent per litre - leaving a price of 30c/l as an very achievable target for processors," he said.
A summer of discontent could well be in store for dairy farmers and their processors.
Meanwhile, the Department of Agriculture has pointed out that an online facility for accepting applications under the Scottish Derogation measure of the Basic Payments Scheme has been made available since April 1, 2015. The closing date for this scheme is May 29. A paper application for this scheme is now available on the Department's website www.agriculture.gov.ie
Persons who never held entitlements under the Single Payment Scheme but who actively farmed in 2013 in either the beef, dairy, sheep or arable sectors are eligible to receive an allocation of entitlements under this derogation.