Idb May Index Does Not Reflect Recent Price Improvements

IFA National Dairy Chairman Kevin Kiersey said that, due to the retrospective nature of the IDB SMP/butter index, the small reduction for May reflected the market weakness accumulated for SMP during the March to mid-May period.

He said the significant powder price improvements in the last three weeks or so, and the more recent butter price lifts, would show in the IDB index from June. He said EU and global market trends continued to be positive, and urged co-ops to reflect this with milk price improvements.

“The current reality of dairy markets is that EU food and feed SMP prices are continuing to lift, with Dutch prices up €130/t and €280/t respectively since the 2011 trough of late March last. Butter prices have also been rising in recent weeks in the wake of the opening of the Private Storage scheme, with spot trade being done at around €4,100/t, up from a 2011 low of €3,620/t,” Kevin Kiersey said.

“International market developments are also positive. The recent Fonterra auction results, which showed a major improvement of 12.9% in SMP prices, and a general weighted price increase of 4.5%, is particularly meaningful because it dealt with peak season supplies, for the period of August 2011 to February 2012, and reflected robust demand even at strong prices,” he said.

“It is clear that the IDB index for SMP/butter traded in May lags behind current trends, and I urge co-ops to take this into account when reviewing milk prices in coming days. A further increase to 33c/l + VAT remains totally justified,” he concluded.

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