Rabobank ‘global Dairy Outlook’ Forecasts Will Give Co-ops Comfort in Holding Milk Prices – Kiersey

IFA Chairman Kevin Kiersey said farmers would legitimately expect a cautiously optimistic approach by their co-ops on milk prices for 2012, in view of the increasing number of positive reports from respected industry analysts – this week’s Rabobank Global Dairy Outlook report being the latest in the series. He urged co-op board members to heed the experts and hold milk prices at least for spring.

Mr Kiersey said: “Rabobank examine the prospects for dairy markets over the medium term (2012 to 2015), and, despite global economic concerns, forecasts solid demand growth at 2.5% per annum, as against 1.6% in 2011. Most of this extra demand is expected from emerging countries, providing good opportunities for the world’s dairy export regions and making the dairy sector ‘the envy of the food world’ ”.

“Rabobank analysis suggests that milk production in low cost regions (New Zealand, Australia, Argentina) will not suffice to meet this demand— which would clearly create opportunities for mid-costs regions such as Ireland,” he added.
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While volatility concerns remain, Rabobank expects a general trend of relatively high product and milk prices because the cost of producing exportable milk will remain high.
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“I found it interesting that Rabobank’s analysis showed dairy farmers’ profitability as having improved less than some might think: farmers are in fact making similar or slightly better margins to those pre-boom, but those are more volatile. Farmers need greater skills to run their businesses, and those in pasture-based systems earn only modest returns on assets,” Mr Kiersey said.

“It is therefore even more crucial than ever that co-ops, in order to allow farmers gear up for the post quota expansion, would pass back the maximum possible returns from the market place,” he added.

“I believe farmers are well justified in expecting that co-ops would hold milk prices at least for the spring. If the strong demand trends flagged by Rabobank come to pass as early as 2012, dairy commodity prices may not weaken further, and could even strengthen again before the year is out. To be fair to farmers, co-ops cannot prejudge milk prices too early, and must give themselves some time before taking a longer view for the year,” he concluded.

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