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.
12 11 2018
CO-OPS MUST COMMIT TO HOLD MILK PRICE OVER THE WINTER AS AVERAGE SUPPLIER LOSING UP TO €1,900 COMPARED TO ORNUA PPIDairy, Dairy Markets
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.
23 10 2018
IFA National Dairy Committee Chairman Tom Phelan said the decisions for September milk prices had been disappointingly cautious in light of the fact that many co-ops still pay less than the Ornua PPI, never mind the September EU returns as reported by the EU Milk Market Observatory.
He said the same excessive caution was applied by most for their August milk price. This was bitterly disappointing for farmers, at a time when Teagasc predicts a 50% drop in 2018 dairy farm incomes, and many farmers still have fodder deficits which will be costly to offset over the winter. The least co-ops could do was to make a clear commitment to, at worst, hold their current milk price till spring.
“Farmers have delivered significantly higher volumes of milk in both August and September, despite the huge human and cash flow challenges caused by the vagaries of the weather and the difficulties and cost of keeping cows fed. By stalling milk prices from August while many of their European counterparts (Friesland Campina, Arla, Lactalis…) were flagging price uplifts right up to October, and in some cases to year end, Irish co-ops have disappointingly let down their suppliers, and bagged large volumes of cheaper milk to boost trade,” Mr Phelan said.
“We understand that market circumstances for the months ahead are more uncertain, with the challenges of global trade wars and Brexit in particular. However, IFCN’s CEO Torsten Hemme, at the organisation’s annual conference in Italy in September predicted clearly that global demand for milk would continue to outpace supply for the coming months and years, which should underpin strong dairy and milk prices,” he added.
“I urge all co-ops to take a good look at the situation of their milk suppliers, and to support them through to the end of one of the most challenging years this generation of farmers has ever experienced, to commit solidly to, at worst, holding current milk prices to spring 2019.”
IFA National Dairy Committee Chairman Tom Phelan today (Tuesday) pointed out that, other than the 4 West Cork Co-ops, no other Irish milk purchasers had returned the August Ornua PPI equivalent price of 31.78c/l + VAT for 3.3% protein and 3.6% butterfat milk, never mind the September 32.70c/l + VAT average returns for dairy products, as reported by the EU Milk Market Observatory (see graph below left). He added that, as European milk purchasers were continuing to raise milk prices for September, October, and in some cases to year end, farmers in Ireland were entitled to wonder whether they were being short-changed by their co-ops in one of the toughest years for cash flow and morale. 1c/l on September milk is fully justified, and should be paid on base prices by all co-ops.