08 Aug 2014
GDT AUCTION OUT OF SYNC WITH US AND EUROPEAN DAIRY MARKETSDairy
Commenting on yesterday’s further 8.4% fall in the average GDT auction price, IFA National Dairy Committee Chairman Sean O’Leary said operators in the auction were over-reacting to high global dairy supplies and the prices reached were unsustainable, even for New Zealand farmers.
He added that it was now operating quite independently from the market evolution on US and European markets, where prices were holding up at significantly higher levels.
Mr O’Leary said clear evidence that European market are uninfluenced by GDT was the fact that the June LTO league showed European producer milk prices rallied on May levels, to €38.99/100 kgs (at 3.4% protein and 4.2% butterfat).
“In the US, the price of cheese and Class III milk for cheese remain very firm, as do whey product prices. SMP prices quoted by the USDA for last week were just above €3,000/t, nearly €600/t higher than the latest GDT price,” Mr O’Leary said.
“Closer to home, on the European market where the bulk of Irish dairy products are exported, prices have eased from their January highs, but at the end of July remained at levels which would return 41 to 42c/l gross (before processing costs) for a representative Irish product mix – and this would justify current price levels of around 36c/l + VAT (37.8c/l incl VAT),” he said.
“I am quite clear that the GDT auction mechanisms will always overshoot realistic levels on the way up and on the way down. Right now, our markets are mostly within Europe, and those have returned enough in recent weeks for milk prices to hold for the month of July,” he concluded.