‘Dairy Co-ops will be in a position to pay 30c/L next spring’

Ireland’s dairy co-ops will be in a position to pay a minimum milk price of 30c/L (inc VAT) next spring, according to IFA National Dairy Chairman Sean O’Leary.

“The milk prices should start to strengthen during the last quarter of this year. And this process should continue on into the New Year,” he said.

O’Leary suggested that multiple indicators are now confirming that the dairy market recovery is very much underway.

“EU and global output are back while demand is picking up in China and other markets.

“The industry must make every effort to leverage the best possible returns over the coming months, and to pass back every last possible cent to help farmers deal with their cash flow crisis,” he said.

O’Leary confirmed that EU supplies in July were back 1.4%, after falling behind last year’s trends for the first time in June.

July supplies in France were down nearly 1% on previous year, while in early September weekly figures were back between 5% and 7%.

German output for the first week in September was also back by 3.4%, confirming a downward trend which began in early May.

UK production was back a massive 8.7% for July, with the same trend continuing in daily deliveries to date,” he said.

“DCANZ has advised that milk output in New Zealand was back 3% in August, which should be one of their major growth months as they head towards peak.

“They have also confirmed their forecast that the 2016/17 season would see a 3% downturn in total production.  Meanwhile, Dairy Australia report that July supplies were 10.3% down year-on-year,” he said.

O’Leary also said that the exception is the US, where August milk supplies were up 1.9%, though the strong US dollar and domestic demand have meant a lower level of export activity.

The IFA Dairy Chair also said that the dairy industry is seeing positive developments on the demand front.

“Chinese dairy imports for the January to August period are up a massive 27%.  WMP imports increased by 22.9%, infant formula by 31.4%, while butter imports were up 34.6% and cheese 30.2%.

Demand from Asia and South America for dairy products has also been up this year, with May figures showing a 7% and 5% year-on-year increase respectively, both on an increasing trend.

“The upshot of lower supplies and improved demand is that market prices have been rising over the past four months. EU average returns based on the Milk Market Observatory reports have increased by over 9c/l over that period, to a late September milk price equivalent of over 30c/l,” he said.

O’Leary said that the Skimmed Milk Price and butter prices reached at last week’s Global Dairy Trade Auctions would return a milk price equivalent of around the same level.

“It is clearly essential that Ornua and co-ops would make every effort to optimise returns from a fast recovering market place to ensure that farmers’ milk prices can be lifted above production costs and into positive margin territory as soon as possible in the coming months,” he said.