Butterfat Scarcity and Strong Global Demand Suggests Further Milk Price Increases Well Justified

Commenting on the fact that Arla Foods have increased their September milk price by a further 1c/kg to 38.3c/kg (around 34.6c/l at 3.3%/3.6%) on the back of an increasingly severe global shortage of butterfat, as well as strongly rising demand, IFA National Dairy Chairman Sean O’Leary said he would expect Irish co-ops to continue increasing milk prices for August and later supplies.

“With butter prices continuing to rise, returns from EU commodities as reported by the EU MMO for the middle of August amounted to around 40.7c/l before processing costs, and this despite weaker SMP prices.

“Global demand is also strong, with European hot weather promoting the consumption of ice-cream, which also played into the butterfat shortages, and a continuation of China’s rocketing dairy demand growth (+30.1% in value for the first seven months of 2017 to July). This has meant that, despite some weakness on some of the protein products, dairy prices are set to remain strong at least to year end.

“In this light, we are clear that further milk price increases are well and truly justified. Between August and December, Irish dairy farmers produce between 35% and 40% of their total annual supplies. Every cent passed back for August milk and beyond will make a significant positive difference to dairy farmers’ financial situation after three years of cash flow challenges,” Sean O’Leary concluded.