Further milk price decreases on the horizon – Woulfe

Irish dairy farmers can expect further milk price decreases in the future, Dairygold CEO Jim Woulfe has claimed today.

In the coming days and weeks, processors are set to announce their respective milk prices for March supplies.

Last month saw a number of processors deciding to drop their February milk prices, with Dairygold dropping its offering by 2c/L – bringing to an end five consecutive months of the processor holding its milk price.

This meant that Dairygold suppliers received a milk price of 34c/L (including VAT) for milk produced in the second month of 2018.

Speaking to AgriLand, Woulfe said: “Clearly, there is a still a significant imbalance between what the market is returning for the entire basket of product today versus what we are paying and what we have been paying for February milk.

“We will be very clear; we can’t defy the law of market gravity – so there will be further corrections and balancing to be done. That will be determined by the board on the basis of all the information available at that time.

I don’t want to put numbers on it; but the basket of product is well under 30c/L at the moment.

“None of us would have anticipated in the early weeks of September last, that the actual return from the basket would go from 36c/L down to below 30c/L inside 12 weeks; that is really significant.

“We are in a very volatile period – the cycles are getting shorter and getting more frequent,” Woulfe said.

Appetite for expansion

Meanwhile, the Dairygold chief executive also added that the processor’s suppliers – 100% of which are certified under the Sustainable Dairy Assurance Scheme (SDAS) – still have a desire to increase milk production.

An in-depth survey carried out in 2017 indicated that 60% of Dairygold suppliers intended to increase their milk supply; members are expected to increase their milk supplies by over 16% between 2018 and 2022.

As part of its annual results for the year which ended on December 31, 2017, the processor outlined that its milk volumes rose to 1.3 billion litres – an increase of 8.3% on the previous year. The figure also represented a cumulative volume increase of 55% since 2009.

Also Read: Continued milk production expansion key to 28% jump in Dairygold’s turnover

Woulfe said that if suppliers wish to increase milk production, Dairygold’s job – as a processor – must be to have the infrastructure in place to process that milk.

Supply and demand

But, he warned that the question at all times is going to be supply and demand. He explained that 2017 was a good year for prices because “you had more of an equilibrium between supply and demand”.

Woulfe added that the return was dominated by fat and that protein was lagging, with that divergence still evident today.

“The weight on the market at the moment is protein weight; that’s the problem,” he said. “Are supplies going to be curtailed to try and move the protein? I doubt it very much. I think, in the context here, that’s going to be dealt with overtime.

“But, there’s no doubt that a fine balance between supply and demand will bring a healthy milk price.”