The Ornua Purchase Price Index (PPI) for the month of February has been announced, with the figure continuing to decline, reflecting general downward trends in global dairy markets.
The index figure for this month is 149.4, down from 162.4 for the month of January.
This converts to a milk price of 45c/L for February including VAT, down from 49.1c/L for January.
This figure accounts for estimated processing costs for Ornua’s member co-ops of 8.5c/L, but excludes any allowance for processor margins.
Ornua said in its announcement today (Wednesday, March 8) that the energy cost element of the processing cost is variable and changes each month, depending on energy costs.
The Ornua Value Payment to members for the month of February is €600,000, which equates to 1.7% of gross purchases in the month (1.3% in the year-to-date).
The decrease in the PPI, according to Ornua, is due to continued weaker returns across the product mix.
‘Squeeze’ in global dairy chain
In other dairy market news, milk prices in the EU are currently in the middle of a “large price correction” which will result in “tighter on-farm margins from quarter two onward”, according to Rabobank.
In its latest global dairy quarterly report, Rabobank states that “pay-out prices stayed high for too long” in Europe.
The Dutch financial services giant said that these high prices led to a “mismatch between dairy farmers optimising milk production on the back of strong margins and dairy companies accumulating losses on the surplus milk”.
According to Rabobank, the main challenge in the EU is not the milk supply, but the “lack of demand” to absorb the surplus milk.
Yesterday (Tuesday, March 7), the Global Dairy Trade (GDT) index saw a slight decrease in its latest trading event.
Yesterday’s event – event 327 – saw the index fall by 0.7%, to a price of $3,403/MT.
The index figure now stands at 1,039, as part of a general downward trend over the last number of months.
Of the five GDT trading events that have taken place so far this year, only one recorded an increase (the event of February 7).