Shot in the arm for EU dairy and milk mar­ket

Irish Examiner - Farming - - FRONT PAGE - Stephen Cado­gan

The EU dairy mar­ket got a shot in the arm last week, with the biggest in­ter­ven­tion skimmed milk pow­der sale since pub­lic ten­ders be­gan in De­cem­ber, 2016.

On De­cem­ber 13, 60,537 tonnes of skimmed milk pow­der stocks were sold, with the EU Com­mis­sion say­ing about three quar­ters of the skimmed milk pow­der bought into pub­lic stock has now been care­fully re­turned to the mar­ket, help­ing to keep EU farm gate milk prices at a “sat­is­fac­tory” 36 c/kg.

EU pub­lic stocks of skimmed milk pow­der (SMP) are down to 100,000 tonnes (from 380,000t in 2017).

The EU av­er­age SMP price at €167/100 kg (the high­est in 2018) has risen 3.4% in a week , and 14% in a year.

How­ever, the EU av­er­age but­ter price has fallen 10% in the past year.

The im­proved EU mar­ket for SMP helped the Dairy­gold Co-op Board to an­nounce an un­changed price for milk sup­plied in Novem­ber, on Tues­day. It stays at 32 cent per litre in­clu­sive of 0.5cpl qual­ity bonus and VAT, based on stan­dard con­stituents of 3.3% pro­tein and 3.6% but­ter­fat. Ear­lier, Glan­bia an­nounced an iden­ti­cal, un­changed price for Novem­ber of 32cpl for Novem­ber man­u­fac­tur­ing milk. It in­cluded a Glan­bia Co-op sup­port pay­ment to mem­bers of 2cpl, with Glan­bia Ire­land re­duc­ing its base milk price to 30cpl.

Glan­bia Chair­man Martin Keane said: “As high­lighted in re­cent months, there has been a sig­nif­i­cant re­duc­tion in dairy mar­ket re­turns, par­tic­u­larly for but­ter­fat, which we must re­flect in the base milk price.

“Brexit de­vel­op­ments and in­ter­na­tional trade un­cer­tainty, off­set to some ex­tent by re­duced in­ter­ven­tion stocks and po­ten­tially lower milk vol­umes from key EU re­gions, are among the fac­tors that will influence dairy mar­kets in the com­ing months.”

Milk prices were also left un­changed from Oc­to­ber to Novem­ber at Arrabawn and Car­bery (which has launched a new vol­un­tary fixed milk price scheme in con­junc­tion with the mem­ber co-ops).

There was some more en­cour­ag­ing price news on Tues­day when prices inched up­wards by 1.7% in the Global Dairy Trade auc­tion. The best com­mod­ity price gains were for im­por­tant EU prod­ucts, with a 4.9% re­cov­ery in the but­ter in­dex, ched­dar up 2.2%, and SMP up 3.4%.

Along­side these signs of de­mand for dairy pro­duce, there are signs on the sup­ply side of sup­ply com­ing un­der pres­sure in the United States, the world’s second biggest milk pro­duc­ing coun­try.

This trend could partly off­set New Zealand’s cur­rent milk production trend, which is near record lev­els.

In Michi­gan, the US state with the sev­enth high­est milk production, more and more dairy farm­ers are strug­gling to keep up with the costs of main­tain­ing their herds and dairy fa­cil­i­ties. Ac­cord­ing to the Michi­gan Farm Bu­reau, the state lost about 150 dairy farms in 2018.

In Oc­to­ber, dairy farm­ers there were op­ti­mistic that a rene­go­ti­ated trade deal with Canada would help to in­crease ex­ports and raise prof­itabil­ity. How­ever, Canada opened up less than 5% of its mar­ket to the US, nowhere near enough to stem the tide of milk over-production in the US.

From January to June in 2018, there were 26 fam­ily farm Chap­ter 12 bank­ruptcy fil­ings in Wis­con­sin and three in Michi­gan.

Here in Ire­land, IFA Na­tional Dairy Chair Tom Phe­lan has said there are many signs that dairy mar­kets will be tighter and prices firmer into the spring of 2019.

He wel­comed the pre­dic­tion by dairy mar­ket ex­perts at Rabobank that a global production squeeze will con­tinue into 2019, and buy­ers may get caught out by the mar­ket “mov­ing quickly up­wards and catch­ing them un­awares” in the first half of the new year.

IFA dairy chair­man Tom Phe­lan pre­dicts firmer dairy mar­kets into the spring of 2019.

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