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IFA National Dairy Chairman Tom Phelan has said that co-ops owe it to their suppliers to reflect in their May milk price decisions the 4.8c/l increase in EU returns and the several points higher than expected 105.4 pts May PPI.

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IFA National Dairy Chairman Tom Phelan today (Wednesday) said co-op boards, meeting within the next week to consider May milk prices, must leverage the improved market returns of the last number of weeks to ensure that, at the very minimum, that the totality of the April payout – base price plus support – is maintained for May milk supplies.

Tom Phelan said, “Both Arla and Friesland Campina last week announced June milk price increases. Arla increased by 1c/kg, which translated into a 1.15ppl increase for UK supplier members, while Friesland Campina upped their ‘guaranteed’ price by 0.25c/kg. FC has stated that it expected European milk purchasers to increase prices further.

“Market returns have been increasing steadily in the last few months, and now underpin solidly the prices currently being paid by Irish co-ops, with real scope for improvements.

“Using only the SMP/butter combination, we see that the most recent EU spot quotes and market average reported prices would return between 33.21c/l and 36.31c/l + VAT. Even yesterday’s GDT auction, which saw a weighted average price reduction of 1.3%, would yield an SMP/butter price equivalent of 31.40c/l + VAT,” he said. (See table of indicators and price equivalents below).

“Dairy farms have only in the last month started to experience some relief from the dreadful fodder shortage and financial pressures following an eight-month winter. Co-ops must take the real opportunity afforded by improved markets to maintain their April payout for May milk, and then leverage the continuing improvements to return correspondingly improved milk prices,” Tom Phelan concluded.

Sources: EU MMO, FCStone International, GDT, Fonterra + own calculations

With global milk output growing at much slower rates (just over 1% for March, the level analysts believe is required to rebalance markets), intervention SMP stock shifting more readily, and international commodity price indices on the up, it looks like we may have seen the last of the (base) milk price cuts for 2018.

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There is no doubt that dairy markets are now recovering, Dairy Chairman Tom Phelan has said. 

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IFA National Dairy Committee Chairman Tom Phelan has said for many dairy farmers, spring only started two weeks ago. Major price cuts by co-ops in the last two months, in addition to the very poor weather, depressing volumes and constituents, and increasing feed costs, have eroded margins massively and caused major hardship and frustration for dairy farmers.

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