Farm Ireland

Friday 15 December 2017

Glanbia in firing line on milk price

Caitriona Murphy

Caitriona Murphy

Dairy farmers have rounded on Glanbia Ingredients Ireland (GII) for its failure to increase the milk price for February, despite signs that international dairy markets are strengthening by the day.

The decision by Glanbia to hold milk price at 33c/l including VAT for February has infuriated farmers, who insist they have been let down by the new organisation.

IFA dairy chairman Kevin Kiersey called on all co-op boards meeting this week to seize the major opportunity GII missed to lift milk prices to 34c/l plus VAT.

His call comes against a backdrop of lower global milk production and higher dairy ingredient prices.

Prices on the online Global Dairy Trade (GDT) auction jumped by 10.4pc last week as the effect of severe drought was felt on New Zealand dairy production.

Milk production on New Zealand's North Island is expected to fall by 15pc this year as a result of drought in the island's dairy regions.

This contraction in New Zealand milk, combined with a slow start to European milk production, should benefit Irish dairy farmers. Some industry experts are now forecasting a strong milk price to be sustained through 2013.

"A lot of the dairy market is about sentiment and when demand is strong, any hiccup on the supply side will push buyers into securing their dairy products as soon as possible," said one dairy industry insider.

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"This is the time of year that buyers are thinking about their requirements for the third and fourth quarters," he said.


"Two weeks ago, I would have predicted a farmer price of 33-34c/l for April/May with a weakening of price after that," said the insider. "Now, I could see a price in excess of 34c/l and a chance that farmers could get the year out of it."

One co-op source in the south welcomed the GDT auction as "excellent news". He said the industry had been worried about demand for dairy products. Processors now hope the GDT lift would stabilise the market, he said.

ICMSA dairy chairman Pat McCormack said he expected announcements of significant price increases for February milk from co-ops this week.

He described the GDT increase, the sixth in a row, as "exactly the news that dairy farmers needed to hear".

Mr McCormack said that, as long as the supply/demand balance was not tampered with by dumping of stock or other commercial manoeuvres, he was confident that prices would continue to improve.

Mr Kiersey of the IFA said the GDT auction results had significantly narrowed the gap between EU and global butter prices and made EU milk powders significantly more competitive, despite the strong euro. This would help underpin firm butter prices within the European market and could lift powder prices, he added.

Mr Kiersey called on co-ops to capitalise on what would be "a very strong dairy year."

Gross returns for EU skim milk powder and butter equate to a milk price of 38c/l (before processing costs), while the latest Fonterra prices for butter (€3,130/t) and skim milk powder (€2,900/t), converted to Irish equivalent, would return a gross 40c/l before processing costs. As wewent to press, Town of Monaghan confirmed that it was holding 33c/l (including VAT) for February.

Irish Independent