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Milk Price

The Ornua PPI for August was 101.8 (29.4 c/L). This includes a 7c processing charge and does not include the Ornua Value Payment. This bonus amount to €3.4m for the month of August. Taking account of this, the IFA adjusted PPI amounts to 30.8 c/L, including VAT.

The Farmgate price paid for milk (3.6% fat and 3.3.% protein) for the 6 main milk processors ranged from 30.6 c/L to 31.5 c/L, including bonuses and VAT.

July August
Ornua PPI 101.7 101.8
Ornua PPI (c/L) 29.3 29.4
Ornua Value Payment €3.2m €3.4m
Adjusted PPI (c/L) 30.29 30.8

 

Processor PROTEIN €/kg c/L protein value FAT €/kg c/L fat value VOLUME CHARGE A+B-C Bonus VAT Standard price
DAIRYGOLD 5.73 19.48 3.50 12.99 4.00 28.47 0.65 1.57 30.69
KERRY 5.69 19.35 3.80 14.07 4.00 29.42 0.5 1.62 31.54
LAKELANDS 6.23 21.16 3.17 11.76 3.50 29.42 0 1.59 31.01
GLANBIA 5.98 20.33 3.60 12.31 4.00 28.64 0.42 1.57 30.63
AURIVO 5.94 20.20 3.46 12.82 4.25 28.77 0.65 1.59 31.01
ARRABAWN 6.27 21.33 3.10 11.48 3.35 29.46 0.2 1.60 31.26

Domestic supply has increased by 3.5% YTD. Global supply is also strong with growth at 1.5%. this is forecast to increase to 1.6 – 2% by year end. After the initial shock of lockdown and the closure of foodservice outlets, consumption has recovered and is only back about 2-5%. Demand has remained steady so far, but it assumed this is due to countries stockpiling rather than a critical demand for product.

Exports to date are ahead of last year and have already broke the €3bn mark. Prices paid for butter have reduced substantially. Exports to Great Britain are back 14%

As milk processors begin to set prices for milk supplied in September, we are seeking a milk price increase of 1c/L, especially from those that didn’t increase base price last month. Given stronger exports, reduced milk supply in the backend and the upcoming holiday season we feel that this petition is justified.

Brexit

In the event of a no-deal Brexit, tariffs for butter and cheddar would be €174/100kg and €153/100kg, respectively.

Activities

The dairy committee met with Sean Coughlan from ICBF

Dairy herd F% P% kgMS 6 week
2010 3.85 3.37 359 52%
2019 4.17 3.53 419 65%
  • Genomic bias came about over 2 main reasons
    • Females introduced into the training population in January
    • 19% of sires had a sire in the training population
  • Bias will be accounted for in the October run
  • Changes to EBI will be small for cows in the next EBI run
  • Almost impossible to get a daughter proven bull for fertility – bull would be 8-9 years old before enough proofs for fertility would be obtained.
  • Genomic predictions for milk production are better than genomic predictions for fertility.

Issues

The new veterinary medicines regulation is due to commence in January 2022. This will require all dairy farmers to adopt selective dry cow therapy (SDCT). Farmers will need considerable support during this transition from industry. The main points we will be lobbying for are:

  1. Assistance from AHI and milk processors to garner awareness on knowledge and to provide adequate training resources.
  2. Adequate capacity of milk recording companies to accommodate increased rates of milk recording.
  3. Easing of SCC penalties imposed by milk processors during the transition.
Chairman Tom Phelan
Executive Aine O’Connell

July Milk Price Update

  • Glanbia: Base price of 29.68c/L for creamery milk at 3.6% fat and 3.3% protein. Farmer members will receive an additional 0.42c/L as their share of GI Profit. Totalling 30.1c/L.
  • Lakeland Dairies: Base price of 31c/L, up 1c from June price.
  • Kerry: Base milk price of 30.5c/L. No change from price announced last month.
  • Barryroe Co-op: Variable milk price for July is unchanged at 32.76c/L at 6% fat and 3.3% protein, including SCC bonus, VAT and 1c from Carbery stability fund.
  • Arrabawn: Increased the price to 31c/L including VAT, an increase of 0.5c/L.
  • Dairygold: Increase of 0.5c/L for its July quoted milk price to 30.69c/L, based on standard constituents of 3.3% protein and 3.6% butterfat, inclusive of bonuses and VAT.
  • Aurivo: Paying a milk price of 31 cent including vat for July milk.
  • Carbery: Carbery is maintaining its milk price for July. If this decision is replicated across the four West Cork co-ops; Bandon, Barryroe, Drinagh and Lisavaird, this will result in an average price for July of 31.9cpl, inclusive of VAT.  1cpl in support continues to be paid from the stability fund. The price is exclusive of SCC or any other adjustments which may be made by the co-ops.

Market Report

  • The most recent dairy market report by Catherine Lascurettes is attached for greater detail.
  • The GDT Index has experienced three consecutive declines, with a reduction of 1.7% following the latest event on August 18th. This comes after a 5.1% drop on August 4th. Drops in the index were across the board with the exception of BMP (wasn’t offered) and SMP, which increased by 1.1% to an average price of US$2,608/MT.  Serious trading decisions regarding the really heavy trading period – the last quarter of 2020 and first of 2021 – which gathers most of the demand promoting events and religious festivals (Thanks Giving, Christmas, Passover, New Year, Chinese New Year, Easter, Ramadan…) will start from autumn, after the summer holiday period. So, we should not read too much in this month’s GDT results.
  • Global milk supplies had been subdued up to May but are now picking up. The EU Commission has predicted an overall increase 0.7% for 2020, which suggests tighter supplies for the remaining months. Europe’s market fundamentals have been relatively well balanced with good milk supplies and strong exports. EU-28 milk collections for June the were up 1.2% putting collections for the first half of 2020 1.6% ahead of last year. Strong year-on-year gains for Poland [+4.6%] and Ireland [+2.9%] helped drive the June volume higher. Germany, the Netherlands and the UK saw less significant year-on-year increases for the month. Domestically, the milk intake for the month of July was 4.4% higher than the same month for 2019, according to the latest CSO statistics. Taking the first seven months of the year as a whole, approximately 5.4 billion litres were taken in for that period, compared to around 5.2 billion litres in the same period of 2019, for an upwards change of 3.8%. Production of butter in July 2020 stood at 30,360t, an increase of 7.5% on the July 2019 figure of 28,200t. Meanwhile, skimmed milk powder production stood at 19,650t in July of this year, an increase of 2.9% on the 19,100t in July of last year.

  • After six consecutive weeks of price stability, the European butter quotation finally made a move, albeit small, to the upside last week (+0.2%), according to multi-national financial services firm StoneX. The European butter quotation has now gone 19 weeks since it last saw a move lower, posting 13 weeks of gains in that period sitting at €808 [+31%] above where it was in mid-April, but €248 [-7%] below where it was at the end of January. EEX butter futures meanwhile have pushed higher in recent weeks with the September 2020 to April 2021 contracts up 2.6% on average over the last three weeks. The stable to firm price action in Europe came about despite the ongoing weakness for fats in the GDT auctionin New Zealand which saw butter (-2.0%) and anhydrous milk fat (-2.9%) both move lower.
  • On the milk powder front, the European SMP index was higher this week, gaining 1.3%, reversing almost half of the declines posted in the previous four weeks. EEX SMP futures have also posted strong gains over the last few weeks with the front six months up 5% over the last three weeks. NZ SMP also saw some support [+1.1%] in the most recent GDT auction, although price weakness for WMP [-2.2%] which accounts for the largest proportion of product offered on the platform contributed to the overall index moving down by 1.7%.

New PPI

  • The first important thing farmers should understand is that the prices paid by Ornua to co-op for dairy products will not be changed in any way by the changes to the PPI. To be absolutely clear, Ornua will not be paying any less for the products co-ops sell through them, and the new PPI should, objectively, have no influence on co-ops’ ability to pay a competitive milk price.
  • The second thing is that the PPI will now reflect commodity returns only.
  • The third important information is that the value of premium, non-commodity products traded for the month, together with the value for the month of the trading bonuses co-ops used to receive only annually in the past, will now be shown below the line.
    Combined, these two values will be called the Ornua Value Payment (OVP).  While the trading bonuses are achieved partially on the trade by Ornua of non-Irish products, they are an actual payment to all co-ops that trade through Ornua.  The OVP will be paid monthly, generating a value which also contributes to the co-ops’ milk price payment capacity.
  • Ornua have decided to express the OVP as a single global monthly € amount, and a percentage of gross purchases in the month.
  • To help farmers better gauge the real value to co-ops of the OVP in terms that they can readily appreciate, IFA will endeavour every month to estimate that value in terms of the cents per litre it adds to the milk price equivalent of the PPI calculated by Ornua.

Activity since last Council

  • IFA met with the DAFM to discuss the issue of live exports and ferries willingness to transport animals. Alternative option of flying calves out of Shannon was discussed.
  • IFA met with Bord Bia in relation to the return of physical auditing.
  • IFA met with DAFM in relation to N derogation review.
  • IFA met with Teagasc to discuss a resolution from Cork Central on the Teagasc Profit Monitor.

Upcoming issues

  • Within the coming weeks, co-ops will be determining their August milk prices. IFA will monitor developments and communicate those, which we hope will continue on the current positive trend, to officers and members. The total reduction in income across primary agriculture in Ireland in 2020 is projected to range from 0.7billion to 1.6billion. In absolute terms, the reduction in average farm incomes is projected to be largest on dairy farms.
  • Collaborating with National Environment Committee in relation to the N derogation review. Change in calculation of Nitrates per cow from 85 to 89 should be left until January 2022 to give farmers the chance to plan accordingly.
  • IFA will continue to state PPI in c/L.
Chairman Tom Phelan
Policy Officer Anna Daly

Market Report and Milk Prices

  •  The most recent IFA Dairy Market Blog is available here for greater detail.
  • Global milk supply growth slowed dramatically in April.Weather events, low prices linked to COVID19 market impacts and production reduction initiatives (France, the US) contributed to this.  Early indications are for a return to normal rainfall in a number of regions heretofore affected by moisture deficit – though for some regions fodder supplies for the year will be negatively affected.
  • 30th June was the end date for APS. As of 28th June, 17730 t of SMP went into the scheme (none from Ireland).  60185t of butter (12604t from Ireland) and 45634t of cheese were applied for, with 100% of Ireland’s allocation received in the first 3 days (2180t).  Disappointingly, only 45% of the total EU available tonnage was used, largely because of the inadequacy of the national allocations.  It is believed over 25% of fresh butter production in the period utilised the scheme – so it would be wrong to suggest it did not play a part in helping with price recovery.  APS may be needed again in the context of Brexit!
  • Dairy commodity prices as reported to the EU MMO by EU member states have been increasing progressively from a trough of around mid-April, depending on products.
  • In the most recent weeks, we have seen some stabilisation of those increases, but no real easing, as is visible from the graph on the right.
  • Spot quotes are also continuing to firm, albeit slightly more modestly than in recent weeks.
  • All commentators (Rabobank, INTL FCStone, Rice Dairy…) have linked the improvement in dairy markets to the fact that the reopening of the global economy is underpinned by unsustainable government spending and support, both directly to the dairy sector (US especially, where over US$1.2b was spent on supporting dairy farmers and dairy markets/food demand, in addition to support to businesses and employment, EU, and beyond). Most are concerned about a recession following any tapering off of those financial supports – though with an EU €750bn recovery package in the offing and an US presidential election in November, it is unlikely to happen in the short term.
  • Consequently, for the coming months, the mood in industry has improved, with market sentiment stronger.
  • Most international indicators have continued to firm, and are now close to or just above the average milk price paid by Irish dairy co-ops (which we estimate at 28.2c/l + VAT or 29.72c/l incl VAT). This is just under the May PPI (see table above right)
  • Strong lobbying by the National Dairy Committee has helped highlight those positives, and secure stable milk prices for May milk, with Dairygold actually increasing prices by 0.5c/l.
  • With the positive trends continuing through June, the Committee will seek improvements in milk prices by all co-ops.

Activity since last Council

  • IFA’s weekly engagement with DII and other stakeholders, including Teagasc, DAFM, ICOS and ICMSA to review developments in the processing sector has been reduced to monthly and/or ad hoc from now on. Collaborative contingency planning between co-ops and hard work by milk collecting and processing staff in every co-op has meant all milk has been collected and processed through peak, and the very real concerns in spring are now behind us.
  • The National Dairy Committee have contributed to the analysis by IFA of the new Programme for Government and to identify the issues of importance to the dairy sector.A number of feared elements which would have been damaging to the dairy sector did not make it to the final document (abolition of the N Derogation, the end to live (calf) exports, or a link being made between 7% annual green house gas reduction and reduction in the dairy herd) – largely reflecting strong and long lobbying of politicians by IFA.  Some positive initiatives, especially with regards to the use of taxation to smooth income volatility, need to be exploited to revive some of our and ICOS proposals in this area.
  • The Committee Chairman and Secretary have continued to participate in the Calf Stakeholders Group meetings.The work of the Group and its members has contributed hugely to increasing awareness of the importance of calf welfare and changed approaches by all farmers.  Statistics made available to the group show that for male calves to late June, there was a slight decrease in male calf births, slightly lower resort to knackeries for young calves, big decrease in marts sales, a big increase in farm to farm sales, a massive decrease in exports, and a significant decrease in young calf slaughters (through the Newcastle West “processing” facility – different from knackeries).  The Group is to be set up on a more permanent footing, with Terms of Reference being drawn up.
  • On a related matter, the €4m calf investment scheme – the closing date for receipt of claims is 30th September 2020. Any delay in this will result in penalties reducing the grant rate.
  • The Chair and Secretary have participated in the online launches of the Teagasc 2018 Sustainability Report (based on 2018 NFS) and the 2019 National Farm Survey.Both present some cause for concern in terms of sustainability, economic first, especially in terms of fast rising overhead costs, and environmental.  It is essential that Teagasc and co-ops would identify the issues and work with farmers to help them address them.
  • IFA has also participated in the ASSAP programme, which is showing a very strong engagement by farmers approached for participation (96% of the farmers approached accept to participate), and is progressing to support farmers in adopting mitigation measures to reduce the loss of nutrients and sediment losses to water courses on farms.
  • We are also today participating in the Dairy Sustainability Forum, a joint forum between the dairy industry (DII and other stakeholders, including farm organisations), the DAFM, and the Dept of Housing (Environment), who engendered the ASSAP programme two years ago.
  • The manner in which the milk price equivalent of the Ornua Purchase Price Index (PPI) is to be presented in future is currently the subject of a review by the Board of Ornua. IFA has always valued the PPI for the unique contribution to market transparency it makes to farmers, which is unparalleled in the dairy sector worldwide, and the envy of many other agricultural sectors.  IFA is therefore very keen to secure the continuation of the publication of a transparent, credible, and well understood PPI further to the review.
    However, with media reports suggesting that the review would consist principally of an increased processing cost calculation, understandable concern has been expressed by farmers as to the signal this would send to co-ops regarding their milk pricing decision at a crucial time.
    A top-level meeting was held between IFA and Ornua, followed by a meeting of the full National Dairy Committee addressed by Ornua CEO John Jordan and Head of Risk Management Colin Kelly.  IFA President, Deputy President and National Dairy Chairman and members of the National Dairy Committee expressed strong reservations regarding the proposed review, especially in terms of the justification for an increased processing cost, but also in terms of its timing and the strategy for its communication providing too short a lead up to the proposed implementation.
    The National Dairy (Management) Committee are to meet later this week to discuss the issue in greater detail.  The board of Ornua are to discuss this matter further at its July meeting, and the Chairman, who has already expressed strong reservations regarding the specifics of the review at the board table, will reiterate them strongly, taking on board fully the views of the Committee.

Upcoming issues 

  • Within 2/3 weeks, co-ops will be determining their June milk prices. IFA will monitor market developments and communicate those, which we hope will continue on the current more positive trend, to officers and members.  We will also articulate our lobbying arguments in advance of the early to mid-July dates by which boards will be making those decisions.
  • The renewal of the Nitrates derogation from 2021 is also coming up, and we have participated in a meeting with Teagasc to better understand the likely additional requirements, including a recalculation of the N load of a cow possibly from 85kgs to 89kgs (conservative figure), but also in terms of slurry storage requirements, spreading, and need to prove exports where farmers operate above 170kgs without derogation.As the Nitrates derogation is vital to the dairy sector, and bearing in mind the government formation talks involving the Green Party and their demands in those areas, the Committee has made a clear decision that will continue to work on this topic in conjunction with the Environment Committee.
Chairman Tom Phelan
Executive Catherine Lascurettes
  1. Market Report and Milk Prices
  • COVID19 has impacted dairy prices severely in early spring, with returns falling by over 9c/l based on EU MMO average market prices, and over 11c/l based on EU spot quotes between January and mid-April.
  • Recent trends have been more positive, with the introduction of a very limited APS scheme for dairy (see below) bringing a little more confidence, but more importantly, we have seen a very slow reopening of food services as more and more countries globally come out of lockdown creating demand to refill empty pipelines to respond to demand in a few months’ time.
  • Spot quotes have increased week on week for over 4 weeks at this stage, and earlier this week the second GDT auction of May was up 1%, with a massive 6.7% increase in the SMP index.
  • EU average quotes are also firming, especially powders and butter, while cheddar cheese, which had held well todate, is easing somewhat.
  • Milk supplies have been rising this spring in most regions bar New Zealand, and in Europe in most countries bar the UK and Denmark.Germany and France have seen much more moderate trends however, and analysts expect the second half of the year, influenced by poorer farmgate prices, to see lower levels of milk production growth.
  • The COVID19 APS scheme opened for applications on 7th May, and Ireland had fully utilised its very modest 2180t cheese allocation within 3 days. By the second week of the scheme, around 38% of the overall 100,000t of cheese had been applied for, with Ireland joining many other countries who had fully utilised their allocation looking for reallocation of any unused quantities. Ireland has also contributed over 6,000t of butter, and no SMP.  The table right shows the most recent data available on dairy APS utilisation all over Europe.
  • Milk prices had been cut by co-ops for March milk by up to 2c/l (Lakeland by 1.8c/l, Aurivo by 1.5c/l).
  • April milk price was further cut by another 1c/l, which could have been greater but for major IFA lobbying, in which the National Dairy Committee joined forces with the National Liquid Milk Committee, FMP and Co. Chairmen.
  • IFA estimates that April milk prices average at 28.38c/l + VAT (29.91c/l incl VAT) – however this average is a simple average of the FJ Milk League, and includes the 4 West Cork Co-ops which, even after a 1c/l total payout cut (half base, half contribution from Carbery Stability Fund) pay an April price of around 32.4c/l incl VAT.By comparison, Glanbia, Dairygold and Kerry pay an April milk price respectively of 28.42c/l, 28.69c/l and 29.5c/l – all VAT inclusive.
  • It is worth noting that Aurivo decided to hold their April milk price at the base March price of 30c/l incl VAT. (note, Aurivo also pays an unconditional early calving bonus of 1.48c/l for March milk, which obviously no longer applies to April milk).
  • See more about the market trends, milk supplies and demand in the IFA 20th May Dairy Market Blog.

 

  1. Activity since last Council – including COVID-19 response
  • The Committee, in collaboration with our Liquid Milk colleagues and County Chairmen, has been actively lobbying board members to minimise the April milk price cut, by urging the review of every co-op’s profit and margin expectation, and by redirecting boards towards costs other than milk prices.While many co-ops had talked of milk price reductions in excess of 1c/l, none as we write have cut by more.
  • IFA is in weekly teleconference contact with DII and other stakeholders, including Teagasc, DAFM, ICOS and ICMSA to review developments in the processing sector.So far, collaborative contingency planning between co-ops and hard work by milk collecting and processing staff in every co-op has meant all milk has been collected and processed, and peak is now passed in many co-op areas.  However, large quantities will continue to test capacity for several weeks, and there is greater nervousness around what has been happening in meat plants (fundamentally different in terms of staffing arrangements and scope for distancing in the workplace, but also in terms of worker cohorts, which in dairy plants are not predominantly immigrants accommodated and travelling to work in groups as is often the case in meat plants).
  • The Committee has been involved in analysing and reacting to the newly announced Farm to Fork and Biodiversity Strategies published this week by the EU Commission, participating in the webinar on this topic hosted by ICOS and addressed by Mairead McGuinness MEP.
  • We have also participated in Brexit discussions with Tanaiste Simon Coveney and Minister Helen McEntee, as the prospect for a no deal Brexit is raising its head again.
  • In anticipation of a likely emergency budget over the coming weeks, the Committee has also contributed to the drawing up of IFA’s pre-budget submission.
  1. Upcoming issues
  • Within 2/3 weeks, co-ops will be determining their May milk prices. IFA will monitor market developments and communicate those, which we hope will continue on the current more positive trend, to officers and members.  We will also articulate our lobbying arguments in advance of the early to mid-June dates by which boards will be making those decisions.
  • The renewal of the Nitrates derogation from 2021 is also coming up, and we have participated in a meeting with Teagasc to better understand the likely additional requirements, including a recalculation of the N load of a cow possibly from 85kgs to 89kgs (conservative figure), but also in terms of slurry storage requirements, spreading, and need to prove exports where farmers operate above 170kgs without derogation.As the Nitrates derogation is vital to the dairy sector, and bearing in mind the government formation talks involving the Green Party and their demands in those areas, the Committee has made a clear decision that will continue to work on this topic in conjunction with the Environment Committee.
Chairman Tom Phelan
Executive Catherine Lascurettes

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