MILK PRICE OUTLOOK IMPROVES FURTHER AS DAIRY PRICES CONTINUE TO LIFT

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MILK PRICE OUTLOOK IMPROVES FURTHER AS DAIRY PRICES CONTINUE TO LIFT
19 Aug 2016

MILK PRICE OUTLOOK IMPROVES FURTHER AS DAIRY PRICES CONTINUE TO LIFT

Dairy, Dairy Markets

IFA National Dairy Committee Chairman Sean O’Leary today (Friday) said the continued strengthening this week of all dairy market indicators augurs well for further price increases.

He said spot quotes, average reported prices, the GDT auction and futures markets were all on the up in the last week again, reflecting lower milk availability globally and positive demand growth, and further proving that the long awaited dairy recovery is taking hold. Farmers badly need significant further price increases for August milk and beyond, and co-ops must now work on delivering on farmers’ legitimate and realistic price expectations.

“The EU Milk Market Observatory’s most recent average price quotes show an accumulated uplift over the last 14 weeks of 40% for whey powder, 32% for butter, 18% for whole milk powder, 12.5% for Cheddar and over 9% for skimmed milk powder. Taken together in a representative Irish product mix, this is equivalent to a gross return, before processing costs, of close on 31c/l. That would be equivalent to a farm gate price of 26c/l + VAT or 27.35c/l incl VAT,” Mr O’Leary said.

“EU spot quotes, which are indicative of market trends rather than current average returns, are coming in at even higher levels. Butter spot quotes in Germany, the Netherlands and France have all increased this week to levels between €3,400 and 3,550/tonne. SMP spots are up an average of €30/t this week in all three countries, averaging €1,800/t. This means further increases in actual market prices are on the cards,” he said.

“Global dairy prices are reflecting the very same trend, with the two GDT August auctions lifting by 6.6% and then 12.4% earlier this week – preceded and followed by strong uplifts in NZ futures. Compared with 12 months ago, GDT commodity prices have lifted by 29% for butter, 33% for SMP and over 45% for WMP,” he said.

“The global evolution of dairy prices in the last three months is due to rapidly falling production growth underpinned by significantly increased cow culls in most dairy production regions except the US. Demand growth has also picked up, especially with China back purchasing powder – and this despite the extended Russian ban and the low, though currently rising, oil prices,” he said.

“I believe the dairy recovery has now truly taken hold, and I urge co-ops to take stock and start to budget for significant milk price increases for August milk and beyond to help farmers get back on top of their seriously stressed cash flow,” Sean O’Leary concluded.

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