June Milk Price of 38c/l + Vat Justified and Sustainable for 2013

IFA National Dairy Committee Chairman Kevin Kiersey said continued firm EU spot quotes for late June and early July, strong June average market returns, and today a second consecutive Fonterra auction showing a clear upward correction, all combined to prove his point that a June milk price of 38c/ + VAT (close on 40c/l incl. VAT) was both fully justified, and sustainable at least to year-end.

“In this week’s Fonterra auction, which deals with trade right out to January 2014, many commodities saw a significant price improvement, with rennet casein up 7.9% and SMP up 3.1%. While the butter price decrease of 5.7% was disappointing, international stocks and fresh availability continue to be very low.”

“Meanwhile, average product returns within the EU, as reported by the EU Commission for the week of 16th June, suggest that a relatively representative Irish product mix dominated by Cheddar cheese, SMP and butter, and with a small element of WMP and other products, would return a gross, pre-processing costs price equivalent of 45c/l based on the EU average,” he added.

“Continued, albeit modest, increases in the main commodity prices on EU markets during June would suggest that the IDB index will likely rise for that month somewhat further than its historical high of 124.7 points for May,” he said.

“I therefore urge co-op boards, who will be meeting in coming days to decide on their June milk price, to lift their price to 38c/l + VAT (just under 40c/l VAT included), a level which is both fully justified based on market returns, and sustainable at least to year-end,” he concluded.

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