A meeting of the IFA National Dairy Committee last Friday heard that dairy market recovery is now truly beyond question, Chairman Sean O’Leary has said.
Global milk production growth has slowed down to 1.15%, supplies all over Europe, Oceania and South America have fallen back dramatically, and prices for the main commodities both at EU and global levels have increased strongly, as further evidenced by last week’s 11.4% GDT price increase.
The IFA Dairy Committee unanimously agreed that a 3c/l increase for October milk is both necessary and fully justified. This increase is in line with what Arla (+4p/l in the UK since August) and Friesland Campina (+3.75c/kg for November, and a total of 8c/kg increase since August) have been doing elsewhere in Europe. It also reflects increased Irish butter and SMP prices, as reported by the EU Milk Market Observatory, as well as strong EU commodity prices generally, and it will certainly translate into a further increase in the Ornua PPI for October.
“There may be a temptation by co-ops to rebuild their balance sheet, after supporting milk prices earlier in the year. However, farmers are still receiving milk prices below production costs, and it is crucial that every last cent fast improving market returns make possible be passed back to farmers,” Sean O’Leary said.
“While there are sizeable stocks of SMP in intervention, the EU Commission has a strong track record, as well as a vested interest, in releasing those stocks prudently, minimising any market disturbance,” he added.
“With average EU gross returns of around 35c/l before processing costs through all the month of October, a 3c/l increase is fair, and will set farmers’ prices up to more sustainable levels for the crucial spring. There is good confidence in market prospects for at least the first quarter of 2017, with favourable output, demand and price trends unlikely to change dramatically,” he said.
“While co-ops will have sold some product forward at lower prices earlier in the year, these contracts are progressively being run down, and replaced with contracts at prices much closer to current levels, and this must be reflected in improved producer prices as soon as possible,” Sean O’Leary concluded.
Co-op board meetings to decide on the October milk price are expected to start from this week, and the IFA National Dairy Committee will lobby all board members for a 3c/l October milk price increase over the coming days.