What's the prospects for milk prices for the remainder of 2017?
The steady recovery in milk prices since the middle of last year has been welcome news for Irish dairy farmers. According to the EU Milk Market Observatory, Irish milk prices at real fat and protein content paid to milk producers increased by 30pc in April 2017 compared to April 2016.
The Ornua Purchase Price Index (PPI) increased steadily from June of last year (value of 81) and has levelled off at around 105 in the first four months of this year, also an increase of 30pc. The index is the monthly indicator of market returns on dairy products purchased by Ornua relative to returns generated in the base year of 2010.
Similarly, the Global Dairy Trade (GDT) auction price index, which is a good indicator of global dairy product prices, recovered strongly from mid-2016 to the end of last year, with prices fluctuating around a stable level since then. The improvement in milk prices was driven by a sharp reduction in milk production in the main world export regions in the second half of 2016.
The gap in year-on-year production is reducing in the first half of 2017, but according to Rabobank, it will be the second half of 2017 before global milk production again begins to exceed the levels reached in 2016.
Both the IFA and the ICMSA have expressed optimism for continuing rises in milk prices. Both organisations have indicated they expect co-ops and processors to announce further price rises for the peak delivery months reflecting the improved returns in dairy markets in recent weeks.
IFA National Dairy Committee chairman Sean O'Leary has set out 10 reasons why he expected co-ops could be ambitious in setting milk prices for April and the peak months, in order to deliver a 33c/l average price for 2017.
But do the recent trends in global dairy product prices suggest that milk prices have plateaued? There is some evidence from processors elsewhere in Europe that this may be the case.
The Dutch LTO organisation reports that some major EU processors, including FrieslandCampina and some French companies, have frozen milk prices in May while others, including Arla and Dairy Crest in the UK, have either already cut prices or proposed lower prices over the coming months.