IFA National Dairy Committee Chairman Kevin Kiersey said the 1c/l January milk price increase announced by Glanbia was the first step in what needed to be a major effort by all co-ops to maximise milk prices as early as possible this year.
He said this was essential to promote a good start to the spring season at a time when market trends would allow the sector to capitalise on strong commodity prices, and when farmers are still struggling with high feed costs.
“I am clear that current firm market returns, which look set to hold for the next few months at least, allow for prices of up to 34c/l + VAT from early spring, with some co-ops having more work to do than others to remain competitive with their neighbours,” Mr Kiersey said.
“Average EU prices for butter and SMP currently return around 39c/l gross, while cheddar cheese plus whey powder returns around 41c/l. Our contention that processing costs are around 5 to 6 c/l has never been challenged by industry, so we would argue that early spring milk prices of up to 34c/l + VAT are realistic,” he said.
Accepting that co-ops had supported milk prices to varying degrees in the early summer of 2012, Mr Kiersey stressed that significant market improvements in the back end of last year had not been fully passed back to farmers, and there was now real scope for co-ops to set themselves and farmers up for a good 2013 production season.
“Global supplies have come back into balance with international demand, stocks are generally low, and while milk prices are rising, they are still generally falling short of costs in most regions. Hence the expectation by all analysts is that markets will remain tight with firm commodity prices for the first half. Commodity prices at EU and world levels are higher than they were this time last year, and the current market trend is buoyant, whereas it was deflating in February 2012,” he said.
“With a strongly positive market outlook and most likely firm dairy product prices for the coming months, there is no reason why co-ops cannot deliver significant milk price increases before peak production starts,” Mr Kiersey concluded.