The Ornua Purchase Price Index (PPI) has increased for September, resulting in an indicative milk price increase of 2c/L.

The PPI for September is 135.8, an increase of the previous month's index of 130.4.

Ornua said this implies an indicative return of 38.2c/L, including 4.5% VAT, for milk at 3.6% fat and 3.3% protein.

This is an increase on the return for August of 36.2c/L, and is net of Ornua's costs to market.

The price is derived from deducting estimated processing costs for Ornua's member processors. This cost stood at 10c/L for September.

The estimated processing cost is based on Ornua’s estimate of the average cost of processing the Ornua "basket of products", which is not representative of any of Ornua's individual member processors.

The estimated processing cost does not include any allowance for member processor margin, and is based on external indices of variable costs (most importantly energy).

The estimated processing cost can increase or decrease every quarter of the year, depending on movements in those external indices.

Ornua said the latest PPI and indicative milk price return "reflect stronger market returns for the month of September".

However, Ornua also said that the PPI does not directly align with milk production and payments, for "reasons of seasonality".

GDT index

In other dairy market news, the Global Dairy Trade (GDT) index has increased following the latest trading event held this week.

The index has increased by 1.2% to 1,177 as a result of the auction which took place yesterday (Tuesday, October 6).

The result reverses the impact of a 1.1% fall in the index after the last trading event in mid September.

This week's event saw a total of 41,692t of dairy commodities traded with an average winning price of $3,928/t.

The results show a mixed picture when it comes to movement in the average prices for each of the product sub-indices.

The index for skim milk powder (SMP) rose by 4.3% to an average price of $3,847/t.

Whole milk powder (WMP) was up 1.2% to an average of $3,605/t, while butter milk powder rose by 0.7% to $4,123/t.

However, there was a 6.9% fall in the average price of lactose to $1,677/t.

Cheddar was back 3.7% to $3,925/t and mozzarella decreased by 3.9% to $3,833/t.

There was a slight fall (-0.3%) for butter to leave an average price of $4,740/t, while anhydrous milk fat was down by 1.1% to $5,683/t.