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Milk price blow as IDB cuts butter by €200/t

The Irish Dairy Board (IDB) has cut its March butter price by €200/t as weak global markets continue to hit commodity values.

This is the fourth month in a row that returns for butter have been reduced by the IDB, with the price dropping €500/t since November.

The latest cut, which equates to almost 1c/l, takes the IDB quote for butter to €3,050/t. Skim milk powder (SMP) was unchanged at €2,200/t.

The IDB move will put further downward pressure on milk prices in the run up to the peak supply months of April and May.

Speaking at the announcement of their annual results last week, Dairygold chief executive Jim Woulfe said that milk prices were likely to come back 10pc this year. Such a move would take 3c/l off returns to farmers given that 33-34c/l is currently being paid.

Sources within the industry suggested that prices would hold for March but that processors were likely to introduce cuts for April supplies.

Kevin Kiersey of the IFA dairy committee urged processors to avoid making rash decisions. He said processors should approach milk prices cautiously and avoid making decisions that could have a major impact on farmers' profitability and confidence.

"From this week, co-op boards will be sitting down to examine the March milk price. I urge them to act prudently towards their suppliers and to minimise any price adjustment," Mr Kiersey said.

"I am concerned by some of the comments made by co-ops in recent times on milk prices. It is important to remember that farmers will need to invest on their farms for expansion.

"Farmers are facing increased input costs, some will have to pay significant superlevy bills, and the industry will also call on them to contribute towards the funding of processing expansion. None of this can happen without profitability and confidence, and excessive or premature price cuts can destroy both."

He pointed out that last week's Fonterra auction, which saw an average 1.5pc price increase, could augur well for a second-half recovery in global dairy commodity prices.

"While an average 1.5pc lift can seem modest, the auction saw a major positive price turnaround of 8.3pc for the prices of butteroil (AMF), 13-14pc for certain protein products and cheddar cheese," Mr Kiersey added.

"SMP prices, while very slightly weaker for the period to June, are actually increasing by 3.3pc for the October to December 2012 contract period," he said.

However, processors said the immediate market outlook remained very weak. This was reflected in the volumes of butter committed to private storage in the most recent tender. A total of 3,709t was accepted from across the EU, with 427t from Ireland. The EU total for the year to date is 24,456t.

Indo Farming