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Soaring prices at Global Dairy Trade heaps pressure on milk processors to lift prices here

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Dairy farm worker milking cows.  REUTERS/Jane Ross

Dairy farm worker milking cows. REUTERS/Jane Ross

Dairy farm worker milking cows. REUTERS/Jane Ross

Farm organisations have hailed a bumper Global Dairy Trade (GDT) auction yesterday and said the result should signal strong Irish milk prices in the coming months.

Prices at the auction jumped on average by 15pc, including 21pc jump in whole milk powder prices and butter prices rising 13.7pc.

The price gains this auction were far, far more than market expectations. The futures market had been anticipating a (stillstrong) lift of 4pc lift prior to the auction, New Zealand's ASB bank said in an Analysis.

It said the result is a particularly dramatic representation of the recent trend we’ve seen– dairy prices are strengthening, and the magnitude of gains is exceeding expectations.

"Aggressive purchasing fuelled by Chinese buyers looks likely to be driving the result. Stockpiles in China aren’t keeping pace with consumption," it said.

ASB also highlighted that shipping disruption fears look likely to have exacerbated recent trends as buyers sought to secure supply.

"The event lasted 23 rounds – the longest in our records – and some buyers were unable to obtain all the product they sought," it said.

However, ASB expects prices to moderate at least little, over subsequent auctions, but said ‘when’ and ‘how much’ are big questions.

"The stable forward contract curve is a good sign. Logistics disruption fears are here to stay, and they are motivating buyers to secure supply early even for shipments some way in the future to meet expected demand. High prices for the longer-dated contract curves are an encouraging sign that prices will remain elevated," it said.

The Chairperson of ICMSA’s Dairy Committee said the latest auction placed the recent steady increases recorded ‘in the shade’ and makes overwhelming the case for a farmer price increase for February milk.

Ger Quain noted that it also sets up peak milk supply to be produced at a strong milk price.

“Dairy markets are performing well at present and - as ICMSA already predicted - this will manifest itself in a higher milk price for farmer-suppliers.

"The strong increases of butter by over 13% and WMP by 21% shows where demand in the dairy products is coming from in this latest GDT. This latest data means that 11 out of the last 12 results have seen positive GDT returns going back to last September.

"The other point to note is that while the results are much higher than expected in percentage terms, they are by no means an outlier or ‘out of sync’ in terms of the trend or direction of milk price.

"This latest round of results puts the case for farmer price increases next month absolutely beyond a doubt and makes them very likely for the months after that too”, said Mr Quain.

IFA Dairy Chairman Stephen Arthur also said co-ops cannot ignore the trends in the latest GDT auction, which has recorded a dramatic jump in commodity prices.

“This rise in commodity prices is equivalent to a farmgate price of over 40c/l for farmers. Movements south of the equator point to a very positive outlook in milk price for 2021. As we approach peak, we will not tolerate processors playing down the price. There is plenty of scope for milk price to rise in the next few months,” he said.

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