Plea to close gap on prices as dairy shortage looms

MILK processors have been urged to “close the gap” on prices, as one of Europe’s biggest dairy companies flagged a shortage of milk, cream and butter by Christmas.

Global milk prices, which are up about 28pc from 12 months ago after producers cut output, have stabilised in recent months.

However, Peder Tuborgh, CEO of Danish-based dairy co-operative Arla Foods, said world milk stocks were very low.

“There is a big lack of fat, cream and butter products everywhere in Europe. It will not at all be possible to meet demand up to Christmas. It is those forces that are dragging up the prices significantly,” Mr Tuborgh said.

Milk prices rallied earlier this year after European producers cut output.

Arla, a co-operative owned by 12,500 farmers in Denmark, Sweden, Germany, the UK, Luxembourg, the Netherlands and Belgium, said it would increase the price it pays for milk from its farmer owners for a third consecutive month in September, by one euro cent per kilo to 38.3c/kg (around 34.6c/l), and could raise it again before the end of the year.

The coming spring season in New Zealand will be key to further price moves in the global milk market, analysts stated.

The ICMSA’s dairy chair Gerald Quain said that quite clearly dairy markets continue to strengthen, in particular butter, and he would share the view of the Arla CEO that milk prices will continue to rise for the remainder of this year, with a further milk price increase for August milk.

While milk prices in Ireland have improved in 2017, it is important to remember that Ireland is currently only in 12th position in the EU in terms of milk price and indeed, New Zealand multinational dairy co-op Fonterra is paying a stronger price than Irish co-operatives, he said.

“With milk prices expected to increase further due to market developments, Irish milk processors also have to catch up with our competitors and it is impor- tant that the gap with our competitors is closed in full in the August milk price,” he said.

The IFA’s dairy chair Sean O’Leary said he would expect Irish co-ops to continue increasing milk prices for August and later supplies. “With butter prices continuing to rise, returns from EU commodities as reported by the EU MMO for the middle of August amounted to around 40.7c/l before processing costs, and this despite weaker SMP prices.

“Global demand is also strong, with European hot weather promoting the consumption of ice-cream — which also played into the butterfat shortages — and a continuation of China’s rocketing dairy demand growth,” he said.

“We are clear that further milk price increases are well and truly justified. Between August and December, Irish dairy farmers produce between 35 and 40pc of their total annual supplies: every cent passed back for August milk and beyond will make a significant difference.”