‘Milk prices could hit 32c/L by next spring’

Irish farmgate milk prices could increase sequentially through to the end of March next year, according to IFA Dairy Committee Chairman Sean O’Leary.

“We will probably see the co-ops increasing milk prices 1c/L at a time over the coming months,” he said.

“Forward supply contracts being set now will take the market through to the end of March next year. And we do know that the world’s dairy markets are gaining strength at the present time.

“But what happens once we get into the second quarter of 2017 is really hard to gauge. Factors coming into play then will be the level of dairy output from New Zealand and the exchange rate between the euro and the US Dollar.”

O’Leary believes there is a strong prospect of Irish producer milk prices be in the region of 30c/L to 32c/L during the first quarter of next year.

“This is a guesstimate based solely on current market sentiment and predictions. The 32c/L price represents the average return received by Irish dairy farmers over the past five years. And it is a price which most producers could live with for spring milk in 2016.”

Meanwhile, AHDB Dairy in the UK is predicting a January 2017 milk return across the EU as a whole of almost 36c/L.

This is the current projection built into the organisation’s Forward Market Performance (FMP) index which monitors the difference in current market prices and prices traded on futures contracts.

Specifically, it reflects traders’ views of the potential supply/demand relationship in the future and analysis is based on futures prices from the European Energy Exchange (EEX).

According to AHDB, the new index cannot indicate how much milk prices will change by but, combined with other market commentaries, can give an indication of the potential movement, or trends, in prices.

Currently, those involved in the EEX futures’ market believe demand will outstrip supply over the coming months.