There is scope to increase the September milk price by at least 2c/L and Co-op boards have been urged to pass back improvements in the markets to farmers.
This is according to IFA’s National Dairy Committee Chairman, Sean O’Leary, who said that continued increases in European Union and global commodity trends and falling milk production fully justify further milk price increases in September and the coming months.
O’Leary also pointed that milk supplies have dropped considerably, helped in part by the Voluntary Milk Reduction Scheme.
“EU milk supplies have dipped below last year’s level for June (-1.6%) and July (-1.4%) and the EU production reduction scheme will probably exacerbate that trend as we go into the back end.
Within individual countries such as the UK, France, Germany and Poland, that falling trend has been visible for several months now.
“Even in Ireland and the Netherlands, where production has continued to increase, the growth levels are considerably slower, with 1.8% and 4.9% respectively for August output from those two countries.
“In New Zealand, output is down 3% for that month, while Australian July supplies are back over 10%,” he said.
The IFA National Dairy Chairman also said that this fall in production reflects the very poor profitability in most countries, while there has also been a strong increase in the number of cow cullings.
He said that the number of EU cow slaughterings are up 7.8% from the first six months of the year and up 9.5% for June alone.
“Together with good demand, including 27% increase in Chinese imports for the first eight months of the year, this has driven a continued recovery in dairy prices which has continued right through September and into October.
O’Leary continued to say that EU returns as of September 25, as reported by the Milk Market Observatory, were 10c/L higher than in early May, at around 35c/L gross for an Irish product mix.
After deduction of processing costs, this is equivalent to a farm milk price of 30 to 31c/L.
However, he also said that IFA recognises that Co-ops have engaged in forward selling at lower prices earlier in the year, but these contracts are progressively coming to an end, and new contracts will reflect prices closer to these higher levels.
“We are clear that there is scope for significant milk price increases over the coming months, and to start with, we urge co-op boards to ensure farmers receive at least 2c/l more for September milk deliveries,” he said.