Cautious optimism that upturn in world dairy prices can be sustained

The results of the next Global Dairy Trade (GDT) auction will give a strong indication regarding the prospects for international milk prices over the coming months, according to Aurivo’s General Manager for Dairy Ingredients and Consumer Products Eoghan Sweeney.

“We will wait and see what happens next Tuesday,” he said.

“But I am cautiously optimistic that we are now witnessing a sustainable upward trend in global milk markets.

“This is being driven by a general upturn in demand for dairy products. I think it is also significant that oil prices have started to increase of late. There is a confirmed link between international oil and dairy markets.”

ICMSA president John Comer agrees with this analysis, up to a point.

“I think that southern hemisphere based processors can manipulate the GDT, when it suits them,” he said.

“Yes, milk markets are improving. But the real driver in this regard is the prospect of a significant cut back in European milk production over the coming months.”

Comer added that the EU’s voluntary milk reduction measures will act to make this a reality.

“If fully implemented then the scheme has the scope to reduce milk output by some 1.1 billion liters over the coming months,” he said.

“This is not the introduction of quotas by the back door: rather it is a voluntary scheme which has the potential to be implemented whenever EU milk prices fall below sustainable levels.”

The ICMSA president is calling on the Irish government to commit to the additional discretionary measures, for which scope is provided under the current EU farm aid package.

“All of this money should be used to boost dairy incomes,” he added.

“I know that some lobby groups are calling on the government to use discretionary funds to facilitate cheap loans to farmers. ICMSA believes this is a fundamentally flawed strategy.

“In reality, the potential now exists to support each Irish dairy farmer by the tune of €1,200, assuming Dublin commits to the national top-up arrangements provided for in the Brussels’ aid package.

“We want to see this option taken by the government and the monies paid out to farmers as quickly as possible.”