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IFA’s new Dairy Executive Aine O’Connell has taken up her role this week.  Aine O’Connell has worked at Arrabawn in farm advisory and with ICMSA.

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Dairy Market Blog – Dairy prices stable to firm

Market returns, after falling steeply between February and mid-April due to the impact of COVID19 on food services and trade generally, have been rallying since May.  In recent weeks, spots have stabilised at those improved levels.  While they have a way to go to recover to pre-COVID19 levels, they nonetheless support current price levels comfortably, as is obvious from the gross returns/milk price equivalents from the main market indicators in the tables here.

 

 

 

 

 

 

 

 

 

Based on EU MMO data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Source: StoneX

GDT: mostly Oceanian product trading

Many will have been worried by the 5.1% drop in the average GDT index in the first auction in August earlier this week.  The first thing to note is that trade concerns mostly new season Oceanian product for the period from Sept to December 2020.  Very little powder and no butter from European traders featured in this event.
Also, August does tend to be a summer holiday month the world over.  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 subdued till May, now picking up

US milk supplies for June were up a massive 5% compared to last year, but that followed an equally steep 5% drop for May.

EU supplies were up 1.3% to May, leapyear adjusted, with the EU Commission predicting an overall increase for 2020 of just 0.7%, which would suggest tighter supplies for the remainder of the year.

New Zealand production for June – the trough month – was up 2% on June 2019.  Jan to June was up only 1%, but we are now in the new 2020/21 season.

Australian milk supplies for May were up a whopping 6%, following a series of monthly increases since January.  Season todate, however (July 2019 to May 2020) is down 0.6%.

 

 

 

 

 

 

 

 

 

 

 

 

Source: AHDB Dairy UK

Demand continues to be sustained by COVID19 supports

Just as the Irish government has brought in a July stimulus package, so have various governments around the world extended (or not!) the initial COVID19 supports targeted to businesses, employers and employees.  Those have played a crucial part in sustaining purchasing power and therefore demand, including for food and dairy.

Trade has resumed, with Chinese imports a mixed picture for June and the year to June.  Butter and AMF (butteroil) are doing quite well, while powder imports are weaker and infant formula just marks time for the year to June.

Whey powder and whey protein concentrates and lactose also appear to do quite well.

 

Source: StoneX

EU exports of butter and WMP have performed well, through the pandemic, with other products a less positive picture.

Butter exports for January to May rose a whopping 37% with WMP a more measured 8%.  SMP was down 17%, with cheese down 4%.

Outlook for milk prices?

In the rest of Europe, milk prices are recovering after steep falls.

Friesland Campina’s guaranteed prices has increased for July by €0.5/100 kgs, and by €1.00/100kgs for August.  Over those two months, that is equivalent to around 1.25c/l at Irish constituents over those two months.  The August milk price, at Irish constituents, would be equivalent to 28.5 + VAT (30.05 incl Irish VAT at 5.4%).

Arla UK will pay 29.26ppl for August milk, which at Irish constituent level is equivalent to 29.33c/l.

August milk prices for French suppliers to Sodiaal Co-op hover around 34c/l (3.2-3.8 constituents) and 36c/l (3.3-4.2 constituents) in Savencia.  Those prices include seasonality bonuses, and are an increase for Sodiaal, and same as July for Savencia.

Irish milk purchasing co-ops (see table right, based on the cents per litre column in the monthly Farmers’ Journal League, which is not ranked on that column, but on the value of solids in €/kg) have increased milk prices in June by an average of 0.84c/l + VAT (88.5c/l incl VAT).

The simple average of the table for June suggests an average price of 29.11c/l + VAT (30.68c/l incl VAT).  It is clear that this simple average is heavily influenced by the performance of the West Cork co-ops, all paying in excess of 30c/l + VAT – in fact the only milk purchasers to do so.

 

 

 

 

 

 

 

 

 

 

 

 

 

Source: FJ Monthly Milk League

Commodity indicators as analysed above, would suggest that there is scope at least for the lower payers in the table above to further improve their July milk price.  Anything less than 1c/l would be mean spirited, as volumes start to dwindle past peak.

 

IFA’s National Liquid Milk Committee has elected a new Chairman, Keith O’Boyle.

The new Chairman produces fresh milk for Aurivo, and farms with his wife Joanne and young children Adam, Sophie and Emma-Jane in Hollymount, Co. Mayo.

The voting was conducted via postal ballot using provisions granted by National Council, given the exceptional circumstances created by COVID-19.

Keith O’Boyle said, “It is an honour to be elected Chair of the Committee. I have a hard act to follow in John Finn, who gave outstanding service to the liquid milk producers of Ireland over the past four years”.

“I believe the lockdown has given consumers a greater appreciation for locally produced, fresh, nutritious foods like our milk and cream. We need to grasp this renewed understanding of the importance of primary producers, and ensure that it is never again taken for granted,” he said.

“I will work in co-operation with the other IFA committees, especially the retail team, to put pressure on the Government and other stakeholders to ensure that liquid milk producers receive a fair share of retail returns. We urgently need the full implementation of the new Grocery Goods Regulations, including the prohibition of below-cost selling, and the promise in the new Programme for Government, long sought by IFA, of an independent Ombudsman to enforce them,” he said.

“The National Milk Agency has regulated the Irish fresh milk market since 1995. It is doing outstanding work, but its remit and legal powers need to be strengthened to ensure an even playing field for the entire liquid milk market, not just the 75% produced by the Republic of Ireland’s contracted suppliers,” he added.

“With the support of the National Liquid Milk Committee, I will be developing a strategy for liquid milk over the summer. I will meet with all of the dairies and retailers to make it clear that they must change their ways when it comes to liquid milk. They must recognise that their supposed commitment to sustainability must include the economic viability of liquid milk producers,” he concluded.

 

IFA President Tim Cullinan said he was shocked to learn that, in the middle of a pandemic which should have taught us all the importance to keep the food chain economically sustainable, some suppliers of fresh milk to the Irish retail trade appeared to have resumed aggressive undercutting practices to secure a slightly bigger share of a static market.

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Speaking to Irish consumers and retailers today on World Milk Day, IFA National Liquid Milk Chairman John Finn urged them, in these unprecedented times of pandemic, to especially value the locally produced fresh milk which they expect to find every day on their supermarket shelves, and to make sure the farmers are paid a fair price for their hard work.

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