Milk production set to soar as steady price lift continues

THE latest lift in milk prices will result in increased production through the back-end of the year, industry sources have predicted.

Milk supplies were up 7pc on 2015 levels to the end of August and processors expect this trend to be maintained on the back of improved prices over the last three months.

Teagasc dairy specialist George Ramsbottom pointed out that 26c/l being offered by most processors was equivalent to around 30c/l when the higher milk solids at this time of the year were taken into account.

Mr Ramsbottom said farmers with ample grass supplies were likely to milk cows on into November at current prices — provided the condition of the cows and the grazing platform permitted — as it made sound financial sense. The surge in milk supplies has been underpinned by strong grass growth in the south and east since the start of September.

However, the west and north have not been as fortunate, with heavy rainfall restricting growth and forcing the early housing of stock.

The lift in milk price is helping to maintain deliveries to processors, despite over 4,400 farmers applying to join the EU’s milk supply reduction scheme.

Kerry Group and Lakeland Dairies moved to a base of 26c/l for September milk. Meanwhile, Glanbia will pay 24c/l, plus an additional 2c/l support payment from Glanbia Co-op.

While the upward movement in prices has been welcomed at farm level, ICMSA said a base of 27c/l was merited on market returns.

“The Ornua PPI now stands at 92.2, which is equivalent to 26.6c/l and that’s based on a 6.5c/l processing cost — itself an excessive figure in our opinion,” said Gerald Quain of ICMSA.

“The PPI is based on returns from Ornua to member co-ops and on this basis, a milk price of at least 27c/l is clearly and demonstrably justified,” he added.

Quain pointed out that the spot market price for milk in Britain was 40c/l, with 42c/l and 39.2c/l available in Holland and Italy respectively.

“Against that background and in the context of the massive cash-flow pressures on farmers, giving farmer suppliers a single cent rise is derisory and we’re calling on co-op boards to insist that their base price for September is at least 27c/l,” he said.

Meanwhile, IFA president Joe Healy has warned that winter bonuses must be lifted to cover the additional costs of fullyear milk production or farmers would exit the business.