A minimum price of 30c/l + VAT would be fully justified on December milk, with a view to reaching at least 33c/l before peak, IFA National Dairy Chairman Sean O’Leary said following the first 2017 meeting of the Dairy Committee this week.
This price is on the basis of the continued firming of EU and many global dairy product prices into 2017, underpinned by falling global milk supplies and solid demand.
IFA National Dairy Committee members will continue to lobby co-op board members ahead of their December milk price decisions, which will be made this week in most cases.
“The US Dairy Exporter Council calculated global milk supplies to be back by over 2.5% in October, even allowing for continued US output increases, in a deepening downward trend which started last June. In the EU, milk supplies as reported by the EU Milk Market Observatory have also been falling since June, and were down 3.6% in October,” Mr O’Leary said.
“With weather challenges in New Zealand, Australia and South America, nearly three years of negative profitability on many EU farms, a massive 1.3% fall in the German dairy herd and the likely impact of the EU production reduction scheme, the outlook is for continued fall in output for the first half of the year at least, according to Erhard Richarts, dairy expert and Chairman of the German IFE (the Kiel based Institute for Agri Economy),” he said
“Despite the last two auctions, in the past 12 months the GDT price for WMP has increased by 49%, SMP by 41%, butter by 30% and Cheddar by 31%. The 3rd January butter and SMP prices, both of which increased despite the 3.9% fall in the weighted average price, would be equivalent to an Irish farm gate milk price of 33.4c/l + VAT,” he added.
“The most recent available EU average dairy prices for the week ending 1st January suggest returns before processing costs of nearly 38c/l, equivalent to a farm gate milk price of up to 33c/l + VAT,” he said.
“Forward contracts concluded at lower prices early last year are being rapidly replaced by higher priced contracts, much closer to the higher prices indicated by both the EU MMO and the GDT trends. This will undoubtedly improve the ability and confidence of Irish co-ops to pay further milk price increases, not only on December milk, but also in the months before peak,” Sean O’Leary concluded.