EASIER GDT DOESN’T AFFECT GLOBAL COMMODITY RECOVERY OR JUSTIFIED MILK PRICE INCREASES

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EASIER GDT DOESN’T AFFECT GLOBAL COMMODITY RECOVERY OR JUSTIFIED MILK PRICE INCREASES
21 Jun 2018

EASIER GDT DOESN’T AFFECT GLOBAL COMMODITY RECOVERY OR JUSTIFIED MILK PRICE INCREASES

Dairy, Dairy Markets, Prices

IFA National Dairy Committee Chairman Tom Phelan has pointed out that the slight softening shown by the two June GDT auctions does not change the fact that international dairy commodity prices are continuing their recovery.

He said the main commodities traded through GDT have seen price uplifts of up to 25% (butter) since the beginning of the year, reflecting the trends now well established in Europe. Co-ops can, and must, start reflecting higher returns by paying farmers higher milk prices from this month.

“Despite the 1.2% average fall in the GDT index, the price reached yesterday by butter and SMP in the auction, in combination, would return an Irish milk price equivalent of 33.5c/l including VAT, after deduction of a nominal 5c/l processing cost,” Mr Phelan said.

“Since the earlier part of the year, GDT butter prices have risen over 25%, Cheddar cheese by 16%, and even weaker SMP by over 8%.

“At European level, spot SMP quotes have continued to firm, last week reaching €1600/t in Germany and France; while butter is holding firm at a historically high average of €6170/t. Combined, and after deduction of 5c/l for costs these would return an Irish milk price of 36.6c/l + VAT.

“Using the EU Milk Market Observatory’s reports for last week also, a more representative product mix including cheese, whey and WMP as well as SMP and butter, would return an Irish milk price after deduction of processing costs of 33.06c/l + VAT.

“Co-ops are increasingly benefiting from those types of returns on rising volumes, as older contracts are replaced with newer, higher priced ones. It is very clear that they have scope to increase milk prices quite significantly, starting with the June milk supplies,” Tom Phelan concluded.

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