Co-ops Must Ensure That Farmers Benefit from Positive Dairy Outlook

IFA National Dairy Chairman Tom Phelan said today’s 2.7% increase in the GDT price for skimmed milk powder is further proof of improved sentiment on international dairy markets.

Mr Phelan added the announcement in the last week by Aurivo of a one-year fixed milk price scheme at 29.8c/l + VAT (31.41c/l incl VAT) was the latest indication, after Glanbia and Kerry, that there were more positive market signals out there than suggested by August milk prices.

In February 2019, Glanbia had announced a 2-year scheme priced at 31.5c/l, while Kerry had run a 30.6c/l forward contract for May to October 19.  Prices are VAT inclusive, and for 3.3% protein and 3.6% butterfat in all cases, and are set at between 1.1c/l and 3c/l more than the August 2019 milk prices paid by the same co-ops.

“The latest fixed milk price scheme announcement, in line with today’s further GDT price increase, suggest greater positivity in market sentiment than the prices announced by some of our main co-ops for August milk,” Mr Phelan said.

“Brexit is undoubtedly a serious concern, but there is mounting evidence from analysts like Rabobank and reports from the EU Commission, the European Dairies Association (EDA), Eucolait and others to suggest that low levels of supplies, lower than normal private powder stocks, and strong, if regionally variable, demand will sustain firmer dairy prices well into 2020,” he added.

“All the indicators we monitor confirm this, as powder prices continue to firm and butter prices stabilise judging from EU average prices, spots and futures.  They and the Ornua PPI currently return between 2.2c/l and over 3c/l more than some of our main milk purchasers pay for milk,” he said.

“Co-ops must recognise that markets are looking better for the months ahead, stop using Brexit to talk down milk prices when other European milk purchasers are holding theirs, and set out plans to at the very worst sustain current milk prices through to spring,” he concluded.

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