Ornua has announced its purchase price index (PPI) figure for the month of February, which is based on a new methodology for determining estimated processor costs, which came into effect on March 1.

The Ornua PPI for February 2024 is 131.5, over six points higher than the figure for January, which was 125.1.

The latest PPI implies an indicative return on milk of 37.3c/L, inclusive of VAT, which is an increase of 0.2c/L on the 37.1c/L indicative return for January.

The figure is based on a member co-operatives’ processing cost of 9.4c/L, up 2c/L from 7.5c/L for the previous month, and a similar increase on the estimated processing cost which has been used in recent PPIs, in which the processing cost element generally hovered around 7.5c/L.

The processing cost figure is about 1c/L higher than that used for the same month last year, which was 8.5c/L.

A new methodology came into effect for determining the processing cost on March 1, Ornua said.

The estimated processing costs are, as before, based on Ornua’s estimate of the average cost of processing the Ornua ‘basket of products’ (which is not representative of individual processors), and excludes allowance for processor profit margin.

This updated methodology will index the variable price elements to “external indices” which will be updated quarterly in arrears.

Using Ornua’s estimate of processing costs from 2020 as a base, the variable price elements will rise and fall each quarter in line with the movement in the variable costs (mainly energy), according to these external indices.

In addition to the latest PPI figure, the Ornua value payment to member co-ops in the month is €600,000, equating to 2.6% of gross purchases in the month.

Ornua also stated that that PPI “relates to product settlements/payments for the month and for reasons of seasonality is not directly aligned with milk production and payment”.

In other dairy market news, the Global Dairy Trade (GDT) Index has seen its first decrease since November 7, following the latest trading event this week.

Following a ‘no-change’ result on November 21, the index – which is updated every two weeks after each auction – had seen six consecutive increases before this week, the highest of which was a 4.2% increase on February 6.

The GDT index decreased by 2.3% after the latest trading event, with the index figure now at 1,086. This figure is notably higher than August 2023, when the index fell to 850, its lowest figure since November 2018.

However, it’s even further off the heady heights the index reached in March 2022, when it hit 1,593, the highest figure in at least the last 10 years.