Co-ops Must Leverage Improved Returns to at Least Hold May Pay-out
IFA National Dairy Chairman Tom Phelan today (Wednesday) said co-op boards, meeting within the next week to consider May milk prices, must leverage the improved market returns of the last number of weeks to ensure that, at the very minimum, that the totality of the April payout – base price plus support – is maintained for May milk supplies.
Tom Phelan said, “Both Arla and Friesland Campina last week announced June milk price increases. Arla increased by 1c/kg, which translated into a 1.15ppl increase for UK supplier members, while Friesland Campina upped their ‘guaranteed’ price by 0.25c/kg. FC has stated that it expected European milk purchasers to increase prices further.
“Market returns have been increasing steadily in the last few months, and now underpin solidly the prices currently being paid by Irish co-ops, with real scope for improvements.
“Using only the SMP/butter combination, we see that the most recent EU spot quotes and market average reported prices would return between 33.21c/l and 36.31c/l + VAT. Even yesterday’s GDT auction, which saw a weighted average price reduction of 1.3%, would yield an SMP/butter price equivalent of 31.40c/l + VAT,” he said. (See table of indicators and price equivalents below).
“Dairy farms have only in the last month started to experience some relief from the dreadful fodder shortage and financial pressures following an eight-month winter. Co-ops must take the real opportunity afforded by improved markets to maintain their April payout for May milk, and then leverage the continuing improvements to return correspondingly improved milk prices,” Tom Phelan concluded.
Sources: EU MMO, FCStone International, GDT, Fonterra + own calculations