IFA National Dairy Committee Chairman Kevin Kiersey said Kerry have taken the first step to live up to their ‘leading milk price’ commitment for 2013 by increasing their May milk price 2.86c/l to 36.26c/l + VAT (38c/l incl. VAT).
He said this vindicated IFA’s argument that current market returns fully justified a major base price increase. He urged all other co-ops to follow suite, by consolidating their April hardship bonuses into the base price, and then further increase the milk price by at least 2 c/l for all milk produced from the month of May.
“I am conscious of the fact that the Fonterra auction system has corrected historically high dairy commodity prices three times – the last time only yesterday with a 5.3% weighted average reduction,” Mr Kiersey said.
“However, the early June 2013 Fonterra prices remain 53% above a year ago. Also, a detailed analysis of this auction confirms the same trend as the previous two: low enough levels of trade for certain products and periods, and a gamble by buyers that ample New Zealand milk production in the new season will alter the supply/demand balance from Autumn,” he said.
“While the announcement by Fonterra of an increased milk price to NZ$7/kg MS will undoubtedly send a strong message to New Zealand farmers, a good early season which can reverse the current tight global supply situation will require some major improvement in pasture conditions by August or September,” he added.
“Meanwhile, market returns will continue at relatively high levels, currently at up to a gross 46c/l, comfortably justifying a significant milk price increase by all co-ops,” he concluded.