IFA National Dairy Committee Chairman Sean O’Leary has urged co-op board members, who will be meeting in coming days to set the September milk price, to hold it at their August levels, and give a commitment to hold to year-end at least.
He said this was particularly important when farmers are concerned about their income prospects next spring, and should be somewhat easier to do at a time when all global and EU market indicators are steadily firming.
“This week saw the fourth consecutive strong uplift in the GDT auction, with a 9.9% increase in the average price for product traded to next April. The recovery of powder prices, with SMP and WMP prices up by around 13%, is particularly significant, and should further impact on international powder prices, including EU prices,” Mr O’Leary said.
“Spot quotes for EU dairy products have been slowly rising for the last four to five weeks; EU and NZ futures have also been trending up for trade up to April/May 2016, especially for powders and butter, as operators recognise current farm gate prices are not sustainable, and build in expectations of increased prices,” he said.
“EU average dairy prices as reported through the EU Milk Market Observatory have also been firming for some weeks now. In the last month, butter prices have increased by €80/t, SMP by €60/t, WMP by €180/t and whey powder by €20/t. Cheddar prices have been static over that period,” he added.
“While gross returns remain relatively low, they are progressively improving as global market sentiment turns. There remains concerns around some product overhang and depressed demand (China, Russian ban and low oil prices), but New Zealand output is now officially forecast to fall by 5%, with the real prospect this could be revised to 10%, and with current weekly shortfalls of around 8% compared to last year due to heavy culling and restricted feeding,” he said.
“Irish output volumes, up 9.2% for the January to August period, will start to peter out as we move into winter. Co-ops must pay particular attention to their suppliers’ cash flow balances, and just as importantly, their confidence coming into next spring. Low constituents on even unchanged milk prices will be challenge enough, and co-ops must now make a commitment to hold prices for the remainder of the year at least,” he concluded.