Fonterra Auction Lift and Continued International Commodity Market Recovery Augurs Well for Milk Prices – Kiersey

IFA National Dairy Committee Chairman Kevin Kiersey said that last week’s dairy market developments in Europe and globally, including the 7.8% increase in the Fonterra average auction price, augured well for milk prices over the coming months.
He urged co-ops to announce the end of price cuts for 2012, and to prepare themselves to increase milk prices paid to farmers as soon as possible – bearing in mind the 30% dairy income loss forecast by Teagasc for 2012 because of earlier milk price cuts and massive cost increases.

“It is now very clear to all that global milk supplies are rapidly falling back into balance with international growing demand. The drought in the US has reduced supplies there dramatically, due to cow stress caused by high temperatures, and fast rising grain and feed prices eroding profitability on farms. Weather factors have also played their part in curtailing production in Europe, with hot dry weather in the South and East and wet cold weather in Northern Europe,” Mr Kiersey said.

“We are now seeing a very clear trend in commodity prices both globally and at European level, with the Fonterra average auction price up 7.8% last week, and SMP/butter Dutch quotes now at a gross (pre-processing cost) return of 34.6c/l. This is an increase of around 6c/litre since the trough of late May, and there is little doubt but that this trend is also improving the commodity prices available to Irish exporters, whether the Irish Dairy Board or co-ops, even if they do not yet match the Dutch spot quotes levels,” he added.

“I believe this trend is now making talk of milk price increases very realistic, and I urge co-op board members to examine this very seriously in the best interest of hard pressed farmers, despite the lower supplies,” he concluded.

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