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IFA National Dairy Chairman Tom Phelan today (Monday) said lower global milk production and the quasi emptying of SMP intervention stocks had led to generally firmer global dairy markets, further reinforced last week by a 6.7% increase – the 5th consecutive lift – in the GDT price index.
This justifies, at the very least, Irish co-ops maintaining the base milk price for last month’s milk.

He added that those processors who cut milk prices in recent months should to reverse those cuts and ensure that the pay-out fully reflects market returns.

“EU milk output has fallen slightly in both November and December, and global milk output has slowed down dramatically. Together with SMP stocks now down to less than 1% of what they were at peak, the supply side has come a long way to meeting an admittedly quieter global demand growth,” he said.

“After a difficult year which squeezed dairy farmers’ margins spectacularly, and with expected continued increases in fertiliser and feed costs into 2019, it is essential that co-ops sustain the highest possible milk price that markets allow. For the short term, we believe this must mean at the very minimum holding their February price, with scope for more positive moves in the months ahead, should current trends continue,” he concluded.

IFA National Dairy Chairman Tom Phelan said the decision by Aurivo, uniquely among co-ops, to cut their milk price for a second month running was a real let down for their suppliers, at a time when markets and the outlook for 2019 justifies price stability.

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IFA National Dairy Chairman Tom Phelan today said that despite the Ornua PPI showing it lags behind firming powder trends for November, co-op board members preparing to decide on their November milk price must note that the case for a commitment to hold prices at least for the rest of the winter is getting stronger with more evidence of markets firming up. After a year where extreme income volatility came from weather related cost factors, farmers will need the support and confidence boost which such a commitment from their industry would give them.

“At its Outlook 2019 event Teagasc rightly highlighted an expected 22% income fall for average 2018 dairy farm incomes, mostly due to a major increase in production costs linked to a 50% additional expenditure on fodder and feed,” he said.

“On the market side, yesterday’s positive GDT auction has shown that global butterfat prices in particular have turned a corner. European food-grade SMP prices are continuing to firm to exceed €1600/t. Much more rapid disposal of SMP from intervention stocks had been carried out at rising prices rapidly trending towards current fresh feed grade levels in excess of €1350/t. EU Agriculture Commissioner Phil Hogan has even predicted all stock would be disposed of by spring,” Mr Phelan pointed out.

“We stated in recent weeks that output trends for year-end are well down in France, Germany and the Netherlands – which between them account for 46% of EU milk supplies, and 51% of EU’s exported milk. The lower output levels for the last quarter of 2018 are mostly due to weather events and fodder shortages, combined for the Netherlands with the effect of herd reduction forced by phosphates restrictions. Lower supplies and depleted intervention stocks have already, and will continue, to alter market sentiment in a positive way,” he said.

“Co-ops have supported farmers extensively during the fodder crisis of 2018, including through deferred repayments for inputs, free credit, rebates, even fodder imports, and this has been very much appreciated. However, farmers’ cash flows are in a bad way as the year comes to a close, with bills coming due, and lower seasonal milk volumes affecting milk cheques. Co-op board members must recognise that farmers will need at worst stable milk prices over the coming months, and thankfully market trends make this a realistic expectation,” he concluded.

IFA National Dairy Chairman Tom Phelan today (Friday) said the decision by the board of Aurivo to cut their October milk price by just over 1c/l is at odds with the other main milk purchasers’ call and will disappoint their suppliers in one of the most difficult farming and financial years.

“IFA’s research has shown that, just like the other main milk purchasers other than the West Cork Co-ops, Aurivo had paid farmers less than the Ornua PPI milk price equivalent for the period from May to September 2018. By our calculations, a 350,000l Aurivo supplier would have received just under €1700 more over that period had they been paid the Ornua PPI milk price equivalent – the October price cut will compound this further,” Mr Phelan said.

“It is crucial that other co-ops take their lead from Glanbia, Lakeland, Kerry and Dairygold, all of which have held their October prices. Aurivo and all other co-ops must now commit to holding their milk price for the rest of the winter,” he added.

“Butterfat prices have eased, but SMP average, spot and futures market prices have all been firming, aided by a massive destocking of SMP out of intervention. There are reasons to be optimistic about powder markets for 2019, and this must help co-ops to hold milk prices for the coming months,” he concluded.

 

IFA National Dairy Committee Chairman Tom Phelan said that analysis by the Committee of co-ops’ milk prices had shown that most had failed to pass back the full value of the Ornua PPI since last May.  The Committee is seeking a commitment by co-op board members that they will hold the milk price for at least all of the winter months.

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