IFA National Dairy Committee Chairman Kevin Kiersey said EU dairy commodity markets continued to be underpinned by lower supplies and limited stocks as the seasonal pick up in production is about to start. He said markets had remained stable at very strong levels for the last two months, and with average gross returns for the main commodities reaching 39c/l, there was no reason for co-ops to resist fully justified milk price increases.
“The factors which have restrained EU milk supplies in 2012, namely a severe cost/price squeeze and unfavourable production weather, have continued to influence and limit production todate. In addition, EU dairy product stocks are low with nothing in intervention and only 19,000t of butter in Private Storage,” he said.
“EU Commission reports on average dairy commodity prices for mid-January put butter and SMP gross returns at around 39c/l, Cheddar cheese and whey powder around 42c/l and whole milk powder at about 37c/l,” he said.
“In their first quarterly dairy report of 2013, Rabobank emphasised that slower production growth in NZ, reduced supplies in most South American and Northern Hemisphere regions, except the US, would sustain firm commodity prices at least in the first half of the year. I believe that, even if Irish milk supplies are still at their low seasonal ebb, the returns above and the positive outlook identified by all analysts justify a buoyant milk price policy by Irish co-ops in advance of spring,” Mr Kiersey said.
“The last three Fonterra auction price increases in December and January, which cover trade out to July 2013, have confirmed this expectation,” he added.
“Farmers are still paying hefty feed and energy bills, and their ability to gear up optimally for the new production season will depend on securing a strong price before it starts,” he said.
“It is clear that the outlook for the first half of 2013 is for stable, strong dairy commodity prices sustaining solid returns for the industry when it has product for sale. I therefore urge co-op boards, who will be meeting in the next two weeks to review the last year and set the January milk price, to give serious consideration to the payment of a top-up for 2012 milk deliveries, and a price increase for on-going supplies from 1st January,” he concluded.