Farm Ireland

Monday 23 October 2017

May milk price hike urged as butter soars

UCD's new state-of-the-art 40-unit rotary parlour was part of a €2m investment in new facilities on its Lyons farm this year
UCD's new state-of-the-art 40-unit rotary parlour was part of a €2m investment in new facilities on its Lyons farm this year
Gerald Quain, ICMSA

Martin Ryan

Processors have been accused of lagging behind other European countries when it comes to passing on milk price rises to farmers.

Worldwide markets have seen dairy fats surge, with butter, whole milk powder and cheddar all performing strongly since April.

The ICMSA's dairy chairman Gerald Quain said farmers were expecting a price rise in the May milk cheque, with butter now sharply up at around €4,600/t on the Global Dairy Trade index.

"Returns have improved considerably and farmers need - and expect - to see these improvements in their May milk cheque, which is a key month for determining dairy farm income for the year," he said.

The ICMSA said the GDT auctions have seen the index rise by 10pc over the last eight weeks, with the butter and skimmed milk powder returning 38c/l before processing costs.

Mr Quain said some co-ops and processors have been paying up to half a cent below the Ornua Purchasing Price Index for the first four months of the year.

"The difference between paying 31c/l and the stated PPI price for just the first four months amounts to over €2,500 on a farm that is supplying 350,000 litres a year. That's a great deal of money to farmers still looking at a stack of 2016 bills," he said.

Glanbia Ingredients Ireland's Jim Bergin said the "very high price" for butter was "worrying".

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"WMP is at a strongish price and we know the African and Middle Eastern markets are sluggish, particularly because of the oil influence," said Mr Bergin, while SMP intervention stocks was a "shadow overhanging the market".

"You have the protein portion of the milk at a very low price and you have the fat portion at a dangerously high price, and the market could suffer because of both." Mr Bergin said they see the milk price as "stable" at the moment, while the market demand has been "fragile".

Meanwhile, Arrabawn chief executive Conor Ryan told the Co-op's AGM he had reasonable confidence that "the milk price will remain stable over the coming months".

"Overall, EU prices have stabilised, though butter is probably driving it on longer than we expected," he said.

The society confirming that a quarter of the suppliers had taken up the option in 2016 of a fixed price of 30.6c/ltr for 10pc of supply for three years, while the EU milk reduction scheme in 2016 was worth €250,000 to the society suppliers.

Arrabawn chairman Sean Monahan said that the society had supported the milk price by €1m in 2016 to pay an average of 27c/l - down 3.4c/ltr on 2015 - while the butterfat average increased from 4.04pc to 4.27pc, but average protein dropped from 3.48pc to 3.43pc.

The society recorded an operating profit of €4.6m, up €2.5m on 2015 and employment increased by 7.5pc to 374 to handle increased output of 21 million litres.

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