Milk price increase ‘justified’, despite a 2.4% fall in latest GDT auction

A milk price increase for September supplies is justified, despite the price index falling by 2.4% at the latest Global Dairy Trade (GDT) auction, the Chairperson of the Irish Creamery Milk Suppliers Association’s (ICMSA’s) Dairy Committee, Gerald Quain, said.

Quain believes that ongoing increases in dairy product prices at recent GDT events – particularly butter – over the course of September should deliver a further price increase for Irish dairy farmers in their September milk payment.

The price increases witnessed at GDT auctions in September follow on from “sustained increases” in the last six months, he added.

Explaining the price index fall at the latest GDT auction, Quain said that some price slippages in skimmed milk powder (SMP) and whole milk powder (WMP) were overstated in the overall GDT index.

But he maintained that underlying European and Dutch market indicators continued to perform strongly.

Quain highlighted three significant indicators that justified a price rise for September supplies.

These include:
  • The butter/SMP combination in the Dutch quotations is returning 41.6c/L after deducting processing costs and adding VAT.
  • At EU level, based on EU Market Observatory data, the butter/SMP combination is returning 44.36c/L before processing costs – with WMP returning 40.9c/L.
  • Monthly milk spot prices within Italy and Netherlands, as reported by the EU Market Observatory, are returning 44.2c/L and 41.9c/L respectively.

Commenting on the prospects of a September milk price increase, Quain said: “The overwhelming evidence from the market is positive and indicates returns over and above where current milk prices in Ireland stand.

“The ICMSA expects to see that reality reflected in a minimum price of 37c/L and Ireland moving up the EU milk price league from its present poor 11th position for the highest paying processor – a position which is unacceptable given our investment in moving to value-added processing and our unique grass-based marketing advantage,” he concluded.