Why the ICMSA believes co-ops 'can and must' hold price into the summer
Following the publication of the January 2018 Ornua PPI and the series of January milk price announcements, the Chairperson of ICMSA’s Dairy Committee said that the stability of the index at 111.3 shows the improved resilience in dairy markets and demonstrates again ICMSA’s belief that milk price “can and must” be held current levels.
Ger Quain said that all three GDT Auctions in 2018 have been positive while Dutch dairy quotations firmed notably in recent weeks:
“The 5.9pc increase in the most recent GDT auction was achieved by increases in all products sold with butter, SMP and WMP achieving over 7pc gains.
He also said European quotes for butter are holding strong and remain at a historically high level in the mid €4,000 per tonne range.
"Dutch quotations for the butter/SMP mix have rallied in the last four weeks while WMP price has increased by over 2cpl since the start of the year and has regained some of the ground lost in the run-up Christmas.
"Demand for dairy products is positive across Europe and globally and we still see the traditional link between strengthening oil prices and demand for dairy.
"Processors and Co-ops can - and must - hold milk price into Q2 and towards our peak production”, said Mr. Quain.
Meanwhile, the boss of LacPatrick Dairies remains optimistic on the prospects for milk prices this year, saying he doesn’t expect a repeat of the collapse in prices seen two years ago.
Gabriel D’Arcy, who oversees the cross-border milk pool, said there were “encouraging signs” on the market side with the global economy.
“The recovery in oil prices is a big factor as well, it will take a little while to feed through. In the past there’s been a correlation between oil prices and dairy prices,” he said.
“There might be a little bit of imbalance at the start of the year that might moderate prices, but I suspect as the year progresses that will iron out. I’d be optimistic.”
LacPatrick currently handles more than 600 million litres of milk with more than 500 suppliers in the North and the remainder of its 1,000-plus farmers in the Republic, around the border region.
He said last year was good in terms of milk prices. “On average, farmers came away with 27 or 28 pence per litre, early 30 cents per litre. Certainly if you were to look at where product returns are today, you’d be lucky to get 25 pence per litre.
“Do I think we are heading into a collapse like what happened two years ago? No.”
He said over the past few months there has been too much milk produced, which far exceeded what was expected. Mr D’Arcy pointed out this has had a “moderating effect” on the main commodity, butter and cheese.
“Pricing is going to be difficult. The overall milk output across the main milk producing regions has recovered very strongly, much more strongly than most commentators would have expected.
“Globally, the milk output is probably increasing year on year about 1.5pc. In Europe, it’s higher and looking like the first half of the year could be exceptionally strong, particularly in Germany and France and Britain.”
There were strong price increases of almost 6pc reported in the last Global Dairy Trade auction. EU dairy prices remain stable, with butter prices slightly up and SMP at 140 €/100 kg for the fourth week.
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