Milk markets – the only way is up

The result of this week’s Global Dairy Trade (GDT) event in New Zealand is proof positive that the world’s milk markets are strengthening.

All the auctions hosted by Fonterra since the turn of the year have reflected the very salient fact that global supply/demand trends, where milk is concerned, have turned in favour of the primary producer.

It’s imperative that all the Irish dairy co-ops reflect this welcome trend back down the line to their farmer-members with immediate effect.

UK dairy analyst Chris Walkland spoke at a conference hosted by Fane Valley Co-op at the end of January.

He said that the prices paid at the then upcoming GDT event would determine the tone of global dairy markets for the coming months.

Sustainable prices

Based on his perspective alone, there is now every reason to believe that Irish milk producers can look forward to a continuing period of sustainable prices.

I sense that all the so-called “experts” underestimated the extent of the drought that is now impacting on New Zealand.

And the same could be said regarding their analysis of the demand for milk powders in China.

The fact that the Ornua Purchase Price Index (PPI) remained unchanged in January is also significant. Prior to Christmas, all the talk was of world dairy markets weakening considerably in the early months of 2018.

As we now know, this hasn’t happened. In fact, the opposite is very much the case – and this reality must be reflected in farmers’ cheques.

‘A 24-7 commitment’

The months of February and March tend to be the most expensive for Irish dairy farmers.

They have lots of freshly-calved cows coming into full milk but no grass available for them. The alternative of offering silage and high levels of concentrates comes at a price. So, from a straightforward production perspective, Irish milk producers really need a premium farm-gate return at this time of the year.

People keep telling me that milk prices have been pretty decent over the past six months – and this is true – up to a point.

However, in real terms, farmer returns are well below where they were 20 years ago. And let’s not forget that the Common Agricultural Policy (CAP) budget has been well trimmed in the intervening period.

In my opinion, Irish dairy farmers deserve a base milk price north of 40c/L every month of the year.

Producing milk is a 24-7 commitment and farmers should be paid accordingly.