As Fonterra lifts their 2017/18 milk price, EU and international commodity prices firm up and intervention powder sells out at last, IFA National Dairy Chairman Tom Phelan today (Wed) said it was time for co-ops to change the tone on 2018 milk prices and start leveraging improved returns for the benefit of farmers.
“The National Farm Survey from Teagasc shows strong dairy incomes for 2017, for what are mostly full-time farms. However, these figures are historical, and the downturn of volatile dairy markets has cut base milk prices by up to 6c/l in the first four months of this year. Across an entire year’s supply, this kind of cut would cost a 500,000l milk supplier €30,000 straight off the bottom line,” Mr Phelan said.
“The downturn of late 2017 is well and truly over. Last week, we heard the April Ornua PPI had stabilised, which was a clear sign that returns available to co-ops have bottomed out, and current market trends suggest they will improve,” he said.
“Today, Fonterra are increasing their milk price by 20 NZ c/kg of milk solids, with a net increased pay-out of 6.90-6.95/kg,” he said.
“EU spot and average market quotes have been firming for weeks. Average EU dairy returns, based on the EU MMO average market quotes for an Irish product mix of butter, SMP, cheddar cheese, whey and WMP have recovered by over 3.5c/l since January. This mix would return a milk price equivalent of 31.5c/l + VAT based on the latest 13th May figures, after deduction of a nominal 5c/l processing cost,” he said.
“Last week’s spot quotes are also well up, with latest Dutch, French and German butter prices averaging just under €6,000/t and SMP just under €1,500/t. This would be equivalent to a milk price of around 35c/l + VAT,” he added.
“Co-ops must stop the negative milk price messaging and focus their attention on leveraging the improved returns for the benefit of their suppliers,” he concluded.