Ornua’s Puchase Price Index (PPI) increased by 1.8%, to 106.8%, for the month of May; this represented its first increase in 2017.

Since the beginning of the year the PPI has remained relatively static. It began the year at 105.4% in January before decreasing slightly to 105% in April.

The last time Ornua’s PPI reached its current level was in the latter half of 2014, almost two and a half years ago.

In the second half of 2016, the PPI enjoyed a surge; it climbed from a low of 81% in June of last year, right up until the level it reached in January 2017.

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Ornua, PPI

Source: Ornua

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This represented seven consecutive monthly increases or a jump of 24.4% over the course of seven months, figures show.

Ornua’s announcement follows on from the results of the latest Global Dairy Trade (GDT) auction; the upward trend continued as the price index increased by 0.6%.

The last time a decrease in the price index was recorded at a GDT auction was on March 7, 2017; six consecutive price increases have been recorded since then.

At the previous three GDT auctions, the price index has climbed by over 3% each time.

‘Dairy market recovery must be passed back to farmers’

Meanwhile, the dairy market recovery can and must be passed back to farmers, according to the Chairman of the IFA’s National Dairy Committee, Sean O’Leary.

Ornua’s May PPI of 106.8% is equivalent to a milk price of 32c/L including VAT, after the deduction of a 6.5c/L processing cost, O’Leary said.

The latest PPI increase of 1.8% supports the IFA’s recent calls for a milk price increase, of up to 2c/L, for May supplies, he added.

The National Farm Survey shows farmers took the brunt of the dairy downturn, with a 17% fall in 2016 incomes.

“While co-ops clearly supported milk prices in 2016, which reduced but did not eliminate profits, Irish dairy and ingredients exports increased by 2% to €3.38 billion; the dairy recovery is continuing in earnest into 2017, but farmers have not seen the full benefit of it,” O’Leary said.

Milk price

Last year, farmers’ income fell despite a 4.4% increase in production, he added.

“Milk prices increased by around 7.5c/L between July 2016 and February 2017, but they have stagnated ever since.

“While co-ops may be tempted to further rebuild their balance sheets, milk prices must now be further increased,” he said.

Farmers do recognise that co-ops made efforts to support milk prices in 2016 in order to soften the blow to farmers, but it did not protect farmers from significant income reductions and cash-flow stresses last year, O’Leary concluded.

Processors are expected to announce their milk prices for May supplies over the coming weeks.