Farm Ireland

Sunday 19 November 2017

'At least a 1c/L price increase is fully justified on January milk'

Ciaran Moran

Ciaran Moran

Ornua has announced a 1.6 point increase in its Product Purchasing Index to 105.4 points, which it stays is equivalent to a milk price of 29.8c/l + VAT (31.4c/l including VAT),

IFA National Dairy Committee Chairman Sean O’Leary said the announcement bears out IFA’s view that at least 1c/L price increase is fully justified on January milk. 

He added that lower payers, including Kerry, need to aim higher than 1c/L to be fair to their suppliers.

“Most co-op boards will be meeting this week and next, to examine milk prices payable for January.

"They must make sure the new increased 5.4% VAT rate benefits the farmers fully, and pass back a fully justified increase of at least 1c/l – more for the lower payers including Kerry – back to support their milk suppliers’ essential income recovery before peak,” Mr O’Leary said.

O'Leary said this week's 1.3% GDT price increase belied the slight easing in spots and futures of recent days. 

"This is because buyers realise that the global milk production scarcity which has been developing for months is now compounded by the Northern Hemisphere only starting to creep up towards peak, and Oceania’s output rapidly falling seasonally,” he said.

“EU market returns throughout December and January have exceeded 37c/l gross (equivalent to a farm gate price of 32c/l + VAT). Irish SMP prices have caught up with EU averages in January, with butter now even exceeding that figure,” he said.

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“As December 2016 figures become available, it is very clear that, other than the US, all dairy regions are seeing production fall.  In the EU, France is back an estimated 7%, the UK around 5%, Denmark also 5%, Italy 4.5%, Belgium 12% and Spain 2%. 

"New Zealand production is down 2.75% for December, while Australia’s is back 4.1%. Argentina’s December output is down by a whopping 19%. While December US production recorded a 2.4% increase, global milk availability is continuing to shrink rapidly,” he added.

ICMSA Dairy Committee Chairperson, Gerald Quain, said ICMSA is anticipating a milk price rise as co-op boards meet to set price for January supplies.

He said that Friesland Campina, the giant Dutch Dairy Co-operative, has increased its milk price for February to now stand at €35/100kg or 33c/L.

"This is an increase of €0.50 per 100kg on last month and provided a clear indication of the level of confidence at processor level in mainland Europe which must begin to be reflected in the price being paid Irish milk suppliers by their Co-ops, who are currently paying well below that price level."

He also said that a rise in the Global Dairy Trade this week point to a solid dairy market, while all the indications are that global milk supplies are expected to remain below previous year levels in most of the key exporting nations – very specifically, New Zealand.

Online Editors