Irish butter prices on a slippery slope

Quotes here are €880 lower than rates being paid by Dutch dealers

BUTTER prices are lagging behind Dutch quotes by €880 a tonne as global demand for dairy fats remains buoyant.

Dutch dealers are quoting butter at €6,800 a tonne compared to €3,500 a year ago — a 94pc rise

Whole milk powder has also risen 35pc from €2,300 to €3,100 a tonne, while the intervention measures for skimmed milk powder have helped steady that market.

With the strengthening of the dairy market, the ICMSA’s Gerald Quain said there was a “hugely concerning gap” opening up between Irish dairy prices and those of mainland EU producers.

“Ireland is currently only in 12th position of the EU in terms of milk price,” said Mr Quain, noting that Fonterra, who are geared towards commodity prices, are paying more than Irish co-ops.

“The internal market price of butter within the EU presently shows Irish butter prices lagging Dutch quotes by a staggering €880 per tonne.”

He pointed out the latest EU Milk Market Observatory report also placed Irish butter prices at €200 per tonne below the EU average.

“How can such a disparity exist when Irish produce is of the highest possible quality and traceability through the Sustainable Dairy Assurance Scheme and a global brand leader in the form of Kerrygold butter?” he questioned.

Ornua has already cautioned that the sharp rise in butter prices can also have impacts on the long-term trade by pushing restaurants and production facilities towards cheaper fats such as margarine.

With dairy markets continuing to perform strongly, the farm bodies have been calling for a substantial price rise for August milk.

The IFA’s dairy chair Sean O’Leary said on the basis of continuing strong EU average returns, a minimum increase of 1c/l for August milk was expected.

He pointed out the EU prices were being carried by historically high and still rising butter prices which hopefully should translate into a firmer Ornua PPI for the month.

“According to the Dutch farm organisation LTO’s monthly European milk price league for July, Irish milk prices as reported are around 1c/kg short of the European average,” Mr O’Leary said.

“EU MMO returns for the week ending 28th August have risen to 41c/l before processing costs — equivalent to 36c/l + VAT. Remarkably, this is off the back of an average EU butter price now exceeding €6,000/t (€6,180/t), and a WMP price, at €3,120, clearly also benefiting from higher butterfat prices,” he said.

He pointed out that between 35 to 40pc of Irish farmers’ milk production is delivered between August and December.

It follows a 9pc increase in the milk flowing through the pipes of creameries in July, with 856 million litres collected.

So far this year the milk pool is up by over 7pc.