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Global dairy output is down, intervention stocks empty – so why aren’t we seeing more market optimism?

2019 global milk supplies to May were estimated down 0.3% (down 0.4% for May itself), with US production static, New Zealand down as the season comes to a close, Australian supplies sharply reduced, Argentinian output well back, and only EU production up very modestly.

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Speaking only days before the first co-ops decide their May milk prices, IFA National Dairy Chairman Tom Phelan today (Monday) said that a price increase of at least 1c/l was justified in most cases, especially for those co-ops which have been paying less than the Ornua PPI equivalent for the last few months.

“All indicators we have been monitoring for the last couple of months have returned more than the main Irish co-ops have been paying.  The May Ornua PPI, which tracks the products and prices traded for the month in question and is therefore very representative of Irish co-ops’ activity, at 30.45c/l + VAT, is only matched or bettered by the 4 West Cork Co-ops.  Since April, with co-ops cutting prices and the Ornua PPI increasing by 1.4 points, the gap between co-op payouts and the Ornua index has in fact widened,” Mr Phelan said.

“Beyond the Ornua PPI, the EU MMO for early June would return an Irish milk price equivalent of 30.81c/l + VAT (32.47c/l incl VAT) after deduction of a notional processing cost of 5c/l.  Average EU spot quotes for butter and SMP on 5th June would have returned a milk price equivalent of 32.02c/l + VAT (33.73c/l incl VAT) using the same processing cost,” he said.

“A drought induced downturn in New Zealand output (-8.4% for April) could influence early 2019/20 production and help maintain the supply/demand balance to sustain higher dairy prices,” he added.

“It is clear that Irish co-ops are being overly cautious, and are denying farmers the real current market returns, making them pay for potential impact from Brexit which have yet to materialise.  Meanwhile, markets are returning more than they are paying back to farmers – this is unfair, when this is the time dairy farmers generate the bulk of their income, and paying back last year’s massively increased bills is taking every available cent,” he said.

“There is clear scope for co-ops to increase the price they pay to farmers, in most cases by at least 1c/l for May milk.  I urge co-op board members, when they sit down to decide in the next few days, to see to it that this is passed back to their fellow dairy farmers,” he concluded.

 

*April 2019 milk price as per Farmers’ Journal Milk League at 3.3% protein, 3.6% fat.

 

 

 

 

IFA National Dairy Committee Chairman Tom Phelan said a huge level of anger was building up among Glanbia suppliers over milk price.  He said Glanbia was the only milk purchaser to have cut their pay-out to farmers in both February and March, and was firmly last in the March league.

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Speaking today, IFA’s Dairy Chairman Tom Phelan said the decision by Glanbia and Lakeland to cut their respective milk price was a big blow for farmers.

IFA had lobbied co-ops intensively over the past two weeks, outlining in detail the 10 reasons why they should hold their price.

The IFA Dairy Chairman said, “Today’s decision by both co-ops is unwarranted. Cash flow on dairy farms is critical at this time of the year, with farmers facing increased costs of production across the board.”

“When you consider that Ornua will be paying a €19m year-end operating bonus to member co-ops, up 27% on last year, you’d have to say the decision by Glanbia, in particular, is completely unjustified,” said Tom Phelan.

As the GDT records its 9th consecutive uplift (+0.8%), IFA National Dairy Committee Chairman Tom Phelan said the Committee would in the coming days be lobbying co-op board members to show them that they must hold the March milk price.  Markets justify it and farmers need it.  “There are at least 10 good reasons why they should do so.”

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