Farm Ireland

Thursday 13 December 2018

‘Global dairy market will remain largely balanced’

First unofficial results are showing that 29,678.98 tonnes of SMP in intervention sold at a price of €1051/t
First unofficial results are showing that 29,678.98 tonnes of SMP in intervention sold at a price of €1051/t

Marius Zaharia

Global dairy prices dropped for the third consecutive time at a fortnightly auction on Wednesday as production in New Zealand continued its slow pickup from weaker levels earlier in the season.

The world's largest dairy exporter curbed its supply late last year due to unusually dry weather, but the pasture conditions have since improved.

"We expect prices to remain at or around current levels until the end of the season," Nathan Penny, senior rural economist at ASB, said in a note.

 "While (New Zealand) production is improving, the recovery from weak production earlier in the season is progressing only gradually.

“With global demand also firm, we expect the global dairy market will remain largely balanced and for prices to track sideways as a result."

 The New Zealand dollar fell to its lowest level since early February at $0.7177. The dairy sector generates more than 7pc of the nation's gross domestic product.

The Global Dairy Trade Price Index dipped 1.2pc, with an average selling price of $3,632 per tonne, auction platform GDT Events said.

The index fell 0.6 pct at the previous sale.

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A total of 18,635 tonnes was sold at the latest auction, falling 3.4pc from the previous one. The auctions are held twice a month, with the next one scheduled for April 3.

IFA National Dairy Committee Chairman Tom Phelan today (Wednesday) welcomed the significant improvement in the 2017 financial performance by Ornua, which saw an 18% revenue growth to well over €2b, and an increase in EBITDA OF 24%. 

He said while this was a result of the development of new and increased routes to markets by the Ornua team, it was made possible by the hard work of Irish dairy farmers, who increased their output of high quality, sustainably produced milk by 9% in 2017, and helped boost the export tonnage to an unprecedented 338,000t. 

He said member co-ops stood to benefit from a 58% increase in trading bonuses, from €9.5m with respect to 2016 to €15m for 2017, and a crucial syndicated bank facility worth €610m over 5 years, which would provide significant support to co-ops’ working capital over that period.

“We are very clear that farmers have contributed significantly to this very strong performance by our main exporter.  We urge co-ops to use the bonuses we understand they will be paid in April to  support farmers through a the more challenging year ahead, after a long cold winter and late, snowy and icy spring have taken their toll,” he concluded.


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