Global index hits two-year high

PRESSURE for a minimum milk price of 30c/l is growing as world markets surge to their highest levels in over two years.

The Global Dairy Trade price index hit its highest point since mid 2014 and Ornua’s PPI Index recorded the third consecutive monthly increase at the beginning of October to 92.2. A further increase is expected to be confirmed later this week.

The latest increase means that the GDT has jumped by 59pc since March.

ICMSA Dairy chairman Gerard Quain said that “based on market returns, there is absolutely no reason why the milk price could not be set at 30c/l for October”.

Following a meeting of the IFA’s dairy committee on Friday, Sean O’Leary said that the IFA “will lobby all board members for a 3c/l October milk price increase” over the coming days ahead of board meetings to set the price which are scheduled to be held by mid month.

Processors are remaining tight-lipped on their price recommendations being prepared for the upcoming board meetings.

However, they are expected to factor in a requirement to retain some of the increases from the market place to replenish reserves which have been depleted by price supports over the past 18 months.

However, the farmer board members are under pressure to ensure balance in the allocation between pay-out in milk price and rebuilding reserves.

While 3-4 c/l is being demanded by producers as “justified” at least 2-3c/l will be required to appease suppliers after the most difficult season in almost a decade.

Suppliers will be quick to point out to the processors that: ÷Irish milk prices returned over 30c/l any time the GDT price index was at 92.2; ÷Dutch dairy quotes for the butter and skimmed milk powder mix have increased by 12c/l since its lowest point in March, delivering an increase of 7c/l since the beginning of August; ÷European butter market prices are up 30pc and SMP are up 16pc since August; ÷Whole milk powder has increased by €500/t in all markets since August, which is also equivalent to 7c/l; ÷Friesland Campina November milk price has increased by over 3 c/l to 33 c/l with supplier prices up 8c/l since August.

Slowdown

The IFA also highlighted that global milk production growth has slowed down to 1.15pc, with supplies all over Europe, Oceania and South America falling back dramatically and commodities performing strongly as evidenced by last week’s 11.4pc GDT price increase.

“Our committee unanimously agreed that a 3c/l increase for October milk is both necessary and fully justified,” he said.

“There may be a temptation by co-ops to rebuild their balance sheet, but milk price to farmers is still below production cost, and its crucial that every last cent be passed back to farmers,” he added.

ICMSA dairy chairman, Gerard Quain noted that “every cent short of 30c/l translates to a €5m loss to Irish milk suppliers in a time of serious cash-flow pressures”.