IFA National Dairy Committee Chairman Sean O’Leary said that while this week’s Fonterra auction result saw a 5.2% price reduction compared to the previous auction, ABARES, the Australian government’s agricultural research body, predicted strong dairy prices into 2014/15, due to robust demand throughout Asia and China in particular, as urbanisation and the growth of westernised diets continue.
“We should not forget that, even allowing for the dip in the Fonterra auction, current commodity prices remain very strong by historical standards, reflecting generally higher global production costs as well as strong international demand and low stock levels,” Mr O’Leary said.
“The slightly reduced butter and SMP average prices in today’s Fonterra auction, allowing for today’s exchange rate with the US Dollar, would return a gross Irish milk price equivalent of 44c/l before processing costs. The most recent available average EU prices for those two commodities, reported for 9th March 2014, showed a slight recovery for butter, and would have delivered a gross milk price equivalent of just under 46c/l before processing costs,” he added.
“I believe we should take a balanced view of the fortnightly Fonterra auction results: the volatility of global dairy market prices is currently restricted by robust demand and low stocks, despite good output growth. While markets may ease later in the year, there are no reasons to expect major milk price adjustments in 2014, and now ABARES is indicating that these market dynamics could continue to underpin dairy prices into 2015,” he said.
“IFA continues to urge co-op boards to hold their milk price for much of, if not all of 2014, and to announce their pricing policy sooner rather than later to help farmers plan,” he concluded.