There Is Scope for at Least 2c/l Increase on September Milk – O’leary

IFA National Dairy Committee Chairman Sean O’Leary has said that, even allowing for this week’s slight cooling off in GDT, continued increases in EU and global commodity price trends, underpinned by falling milk production and rising cow culling in all regions bar the US, fully justify further milk price increases for September and the coming months.

Sean O’Leary said he believed there is real scope for at least 2c/l of a price increase on September milk, and urged co-op board members, who will be meeting from next week to decide on this issue, to pass back fully the rapidly improving dairy market returns.

“EU milk supplies have dipped below last year’s level for June (-1.6%) and July (-1.4%) and the EU production reduction scheme will probably exacerbate that trend as we go into the back end. Within individual countries such as the UK, France, Germany and Poland, that falling trend has been visible for several months now. Even in Ireland and the Netherlands, where production has continued to increase, the growth levels are considerably slower, with 1.8% and 4.9% respectively for August output from those two countries. In New Zealand, output is down 3% for that month, while Australian July supplies are back over 10%,” Mr O’Leary said.

“This reflects very poor profitability in most countries, with very strong increases in the number of cows culled – up 7.8% for the first half of the year, and 9.5% for June alone in the EU,” he said.

“Together with good demand, including 27% increase in Chinese imports for the first 8 months of the year, this has driven a continued recovery in dairy prices which has continued right through September and into October. EU returns on 25th September, as reported by the EU Milk Market Observatory, were 10c/l higher than in early May, at around 35c/l gross for an Irish product mix. After deduction of processing costs, this is equivalent to a farm milk price of 30 to 31c/l,” he said.

“We recognise that co-ops have engaged in forward selling at lower prices earlier in the year, but these contracts are progressively coming to an end, and new contracts will reflect prices closer to those higher levels. We are clear that there is scope for significant milk price increases over the coming months, and to start with, we urge co-op boards to ensure farmers receive at least 2c/l more for September milk deliveries,” Sean O’Leary concluded.