Following yesterday’s bumper Global Dairy Trade auction, Gerald Quain, Chairperson of the ICMSA Dairy Committee has said that there’s no reason why milk price can’t be set at 30c/L for October.
Irish co-ops will be setting their milk prices for October in the coming weeks.
The relative inaction of processors and co-ops shown in the face of the hugely strengthened market thus far would have to end for October milk price, Quain said.
He said that based on market returns there was absolutely no reason why milk price could not be set at 30c/L for October.
“Demand for dairy products has now reached a level that has seen a 59% jump in the GDT price index since March 2016 and has almost doubled since its lowest point in August 2015.”
We won’t accept a repeat of the ‘deafening silence’ from the processors this month and let’s be clear – the 1c/L price rise last month in no way reflected the obvious buoyancy in markets.
“These kind of minimal ‘inching-upwards’ price rises are very frustrating for suppliers in the context of the kind of cash-flow pressures that milk suppliers are experiencing this autumn after what has been a basically horrific year for dairy farmers.
“The maths breakdown of the situation at the moment gives farmers a milk price of 30c/L and that’s what the board members should be demanding from their co-op,” Quain said.
Yesterday, dairy product prices rose 11.4% at the Global Dairy Trade auction, with a 19.8% increase in whole milk powder (WMP) prices the main driver of the jump in prices.
Skimmed milk powder (SMP) and butter prices also increased at the latest auction, by 6.5% and 4% respectively.
Global Dairy Trade price surge follows rapid decline in New Zealand production
Meanwhile, Nathan Penny, Senior Rural Economist with ASB Bank said that the price surge follows a rapid decline in New Zealand production on the back of very wet weather.
“Fonterra has reported that late October milk volumes in the key Waikato region have been down around 14% versus the same time last season.”
Fonterra also followed that announcement by lowering its milk collections forecast to 7% below last season (from a 3% fall previously).
“This is in line with our forecast drop of 5% nationwide across all suppliers (note that Fonterra continues to lose milk supply share),” he said.
At this juncture, Penny pointed out that prices have lifted earlier and higher than ASB had anticipated.
As a result of this, if New Zealand production is indeed as weak as it now anticipates, then prices are likely to stabilise at current levels, if not lift further, he said