Ornua’s Purchase Price Index (PPI) a monthly indicator of its market returns on dairy products fell again in December.
The PPI index fell a further 1.6 points to its current level of 86.6. Ornua’s returns are now some 8% lower than those of December 2014 and a massive 35% off those received in 2013.
Ornua’s PPI is now equivalent to a milk price of 24.6c/L.
The PPI represents products sold by Ornua (typically butter, cheese, whole milk powder and protein products), relative to comparable returns generated in a base year (2010).
Globally dairy markets continue to be depressed.The first Global Dairy Trade auction of 2016 recorded a decrease of 1.6% on the last auction held on December 15, 2015.
The main movers were butter – up 6.7% and lactose – up 11.4% while whole milk powder was down 4.4% and skim milk powder was down 0.8%. Some 25.6m tonnes of product were sold to 166 bidders.
Rabobank expects the brakes to be applied to milk production in export regions in the first half of 2016, according to Rabobank Dairy Senior Analyst Kevin Bellamy.
Although this will be less dramatic and less evenly spread than we had in mind a few months ago, he said.
At the same time, the Rabobank Dairy Quarterly report expects that lower pricing and some improvement in income growth will foster improved buying in deficit regions.
These dynamics will see excess inventories gradually eroded as the first half 2016 progresses, with stocks approaching normal by around mid-year, according to Rabobank.