Ornua Ppi Increase Bears out IFA Analysis: 1c/l at Least Justified on January Milk – O’leary

IFA National Dairy Committee Chairman Sean O’Leary has said this week’s announcement by Ornua of a 1.6 point increase in their Product Purchasing Index to 105.4 points, which they state is equivalent to a milk price of 29.8c/l + VAT (31.4c/l including VAT), bears out IFA’s view that at least 1c/l price increase is fully justified on January milk. He added that lower payers, including Kerry, need to aim higher than 1c/l to be fair to their suppliers.

“Most co-op boards will be meeting this week and next, to examine milk prices payable for January. They must make sure the new increased 5.4% VAT rate benefits the farmers fully, and pass back a fully justified increase of at least 1c/l – more for the lower payers including Kerry – back to support their milk suppliers’ essential income recovery before peak,” Mr O’Leary said.

“Yesterday’s 1.3% GDT price increase belied the slight easing in spots and futures of recent days. This is because buyers realise that the global milk production scarcity which has been developing for months is now compounded by the Northern Hemisphere only starting to creep up towards peak, and Oceania’s output rapidly falling seasonally,” he said.

“EU market returns throughout December and January have exceeded 37c/l gross (equivalent to a farm gate price of 32c/l + VAT). Irish SMP prices have caught up with EU averages in January, with butter now even exceeding that figure,” he said.

“As December 2016 figures become available, it is very clear that, other than the US, all dairy regions are seeing production fall. In the EU, France is back an estimated 7%, the UK around 5%, Denmark also 5%, Italy 4.5%, Belgium 12% and Spain 2%. New Zealand production is down 2.75% for December, while Australia’s is back 4.1%. Argentina’s December output is down by a whopping 19%. While December US production recorded a 2.4% increase, global milk availability is continuing to shrink rapidly,” he added.

“Milk price increases continue to be justified, and the National Dairy Committee will continue to lobby board members to deliver fully back to farmers what significantly stronger market returns allow,” he concluded.

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