Reacting to the latest Fonterra auction which saw a further 2.4% increase in the price of commodities for trade to April 2014, IFA National Dairy Committee Chairman Kevin Kiersey said this reflected the continued global buoyancy of dairy markets, caused most recently by supply shortages in China.
“Co-ops need to do more than just increasing September milk prices. They must show greater ambition in the best interest of their suppliers, by passing back more of the stronger than expected market returns on all 2013 milk supplies, ensuring that all farmers regardless of production system can benefit.” He added that part of this effort by co-ops should include solid milk price commitments well into 2014, to help farmers still struggling with merchant credit bills to plan their way towards the end of the quota regime.
“Globally, a supply crisis in China has seen them import 27% more dairy products in the second quarter of this year than in the previous 12 months. Rabobank see this as a partly structural problem in China, with domestic supplies down by 6% in the first half of 2013. China is the largest dairy product importer in the world, and their action alone, in the context of still sluggish recovery in global milk production, is what Rabobank claim is causing further global price increases, as evidenced in this week’s Fonterra auction results,” Mr Kiersey said.
“Meanwhile, average EU dairy prices have continued to creep up well into late September in response to a still undersupplied market with low stocks. The main commodities return between 46 and 48c/l before processing costs. Irish average prices have also been trending towards the higher EU averages, and Irish SMP/butter would have returned a gross 46c/l in early September. I fully expect the IDB index, which in August had risen to a high of 133.5 point, to continue reflecting this trend, with a likely small lift for product traded during September,” Mr Kiersey said.
“Irish milk supplies, which had seen strong growth during the summer – up 5.6% on last year for the June to August period alone – are now starting to fall back seasonally. This time of year I feel co-ops need to do more than just focus on increasing one month’s milk price,” he said.
“I believe co-ops need to develop ways of passing back more of the even stronger than expected market returns of 2013 to all producers and for all milk supplies, and they also need to make firm commitments to strong price levels well into 2014,” he added.
“These commitments will be crucial in helping dairy farmers, who are still struggling with outstanding bill payments accumulated over the last 12 months, to plan their way towards the end of quotas,” he concluded.