Farm Ireland

Tuesday 20 February 2018

ICMSA and IFA demand a rise in price of milk

Great day: Minding her calf at the annual show at Dunmanway Co Cork was Dervla O'Donovan (10)
Great day: Minding her calf at the annual show at Dunmanway Co Cork was Dervla O'Donovan (10)
Caitriona Murphy

Caitriona Murphy

THE Irish Dairy Board price index rose yet again to another record high of 126.7 last week.

The monthly index rose by nearly 2pc on the back of strengthening returns for both butter and skim milk powders, which account for a third of national dairy output.

Both the ICMSA and the IFA are now calling for milk price increases to 40c/l.

Since July 2012, the index has increased by 37pc. Milk price for farmers has increased by 30pc over the same period.

"We expect to see the IDB index increase reflected in a minimum price of 40c/l when co-ops and processors meet to set their June prices next week," the ICMSA deputy president Pat McCormack said.

Meanwhile, fears of a dairy price crash from the current record high levels are fading, industry insiders maintain.

Dairy analysts have predicted a soft landing for dairy commodities, with prices easing through the back end of 2013 and into the first quarter of next year.

"Prices are expected to drift downwards as supply improves over the next two quarters, but change is likely to be gradual," Tim Hunt of Rabobank predicted in the lender's quaterly dairy review.

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Crucially, Mr Hunt described the expected fall-off in dairy prices as "likely to look more like a deflating than a puncturing of international prices."

ICOS dairy specialist TJ Flanagan said trade experts at a European Commission meeting on milk last week echoed Rabobanks comments, predicting that dairy prices would "drift downwards" in the back end of 2013.

International dairy prices peaked at record levels in April, just 10 months after the last market trough. Although prices fell by 10-12pc in mid-June, they remain exceptionally high by historic standards, according to Rabobank's latest quarterly dairy report.

The current peak in dairy markets is mainly supply driven, with the New Zealand drought and an awful spring in Europe among the reasons for the lower supplies.

However, world dairy supplies are expected to increase later this year and into 2014. New Zealand milk production is expected to grow by 12pc, which will bring it back to its normal annual production growth of 3pc from a low base in 2012.

Dairy farmers in the US are expected to ramp up milk production as a result of one of biggest cereal and corn harvests in almost 70 years.

A bumper crop of cheap grain and maize will slash feed costs on dairy farms.

"If the margin over feed costs is big enough, that will turn on the tap in the US," remarked TJ Flanagan.

However, he added that milk supplies in Europe would not rise as much as expected.

"The fodder situation in Europe is worse than was previously thought. Fodder quality and quantities are an issue in northwest and eastern Europe."

But Irish dairy farmers are forging ahead as good grass growth conditions drive on milk supplies to co-ops.

Improved milk supplies to Kerry by the end of June put the company 5.1pc or 20m litres under quota, compared to 7.25pc under quota at the end of May.

Glanbia Ingredients Ireland (GII) is 0.5pc or 1.7m litres over quota for June. The company reports very strong supplies during June, with deliveries running 7pc up on 2012 on a week-to-week basis.

Dairygold was 1.23pc under quota at the end of June, compared to 3.4pc under quota in May.

"Milk supplies are running 8pc higher week on week and I expect our quota position to be eroded by July 20," said a spokesman for the co-op.

Connacht Gold was 6pc or 12m litres under quota at June 30, compared to 8pc under quota in May.

Lakeland is 2pc under quota, while Town of Monaghan is 5pc (3-3.5m litres) under quota, with weekly June supplies 2-4pc higher than June last year.

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