Farm Ireland

Sunday 18 March 2018

Dairy board slashes butter price by €600/t

Declan O'Brien

Declan O'Brien

Fears grow of serious drop in milk price for peak supply months

The Irish Dairy Board (IDB) has slashed its butter price by €600/t for April supplies.

In what amounted to a major readjustment in the prices paid to its processor members, the board also cut the quote for skim milk powder (SMP) by €150/t.

The move equates to a 4c/l drop in milk price and will add to dairy farmer fears of a serious cut in returns from processors for the peak supply months of April to July.

The ICMSA has roundly condemned the IDB decision. Its deputy president, Pat McCormack, expressed anger at the timing and scale of the cuts.

But processors said the price reductions reflected the continued weakness of global dairy markets. While industry sources accepted that the trade appeared to have settled recently, they claimed that Irish milk prices were significantly out of line with what was happening on commodity markets.

Depressed world markets have already had an impact on local milk prices, with Arrabawn pulling its March price by 1.95c/l to 32.5c/l (VAT inclusive).

However, in the wake of the IDB's move, it is anticipated that the main players in the sector will follow Arrabawn's lead by cutting prices for April.

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Farmer representatives fear that some co-ops could pull prices by as much as 3c/l in April, followed by another reduction for May supplies if markets have not improved.

Heavy lobbying of co-op boards has been reported as farm organisations battle to limit the extent of any milk price reductions for the next quarter.

The latest IDB price drop means that the price paid by the board for butter has fallen from over €3,500/t in December to €2,450/t in April.

This amounts to a 30pc fall in just four months. The price of SMP has also dropped back to €2,050/t. The full extent of these price cuts if passed back to farmers would be 6c/l.

Although a sizeable cut in the IDB butter price had been anticipated this month, the scale of the readjustment has caught many in the sector by surprise and provoked an angry response from the ICMSA.

"As recently as January the IDB said their policy was to secure premium and stable markets. The German butter market was used as an example of this kind of premium market," Mr McCormack said. "In fact, we were told that they had deliberately avoided 'spot payments' in the latter part of 2010 and 2011 precisely because they wanted to secure that kind of stable market so as to protect our exports during tougher times," the ICMSA deputy president said.

Dairy farmers would now want to know happened to this policy, Mr McCormack added.


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