The country’s co-ops have been put on alert by farm organisations that they expect the current positive market sentiment to translate back into better farm gate prices over the coming months.
Following the announcement from numerous milk processors of a lift in their July milk price, the chairperson of ICMSA’s dairy committee, Gerald Quain, said he wholeheartedly welcomed the news.
Mr Quain noted that Lakelands, Kerry, Aurivo and individual co-ops in West Cork had all raised their price for July milk, but, he said, farmer attention would focus on what he described as the “very substantial discrepancies” that existed between the final prices of those co-ops.
Farmers will be looking at the fact that Lisavaird are paying over 35cpl while Aurivo are at 31.5 cpl,” he said.
“That’s a very substantial price gap and while ICMSA will always acknowledge those co-ops paying a rising price, we equally will always stress that the Ornua PPI is the minimum price that should be returned and a higher price must be paid if possible, said Mr Quian.
Looking at current wholesale markets, Mr Quain said they showed that Dutch Dairy Quotations had reached higher levels across most categories again, with butter fetching over €5,500 per tonne after slipping back last month.
“The standard Butter / SMP mix is equivalent to 34.1cpl translated back to the farm gate, and those prices will have to be returned if initial estimates of total costs of production for 2018 are correct,” he said.
The dairy leader said that the doubling-up of 2018 costs caused by the long winter and summer drought will exert pressures on every dairy farmer in the country.
Co-ops will have to understand that many of their suppliers were going to be at make-or-break levels this coming winter and spring and milk price will decide the issue either way, he said.
Meanwhile, IFA national dairy committee chairman Tom Phelan said that Kerry’s Eamonn Scanlon and Glanbia’s Siobhan Talbot had recently expressed confidence in the market place, borne out by the latest European quotes, despite a negative GDT.
“This must lead to higher milk prices from August supplies,” he said.
Mr Talbot said that co-ops had “taken fright” earlier this summer and been overly conservative in just holding base prices, some making do with temporary “support” payments which could readily be whipped out.
“I think it is important to put GDT auctions in context. The USDA predicts that over 7.5m tonnes of dairy products will be traded globally in the year ending December 2018. The quantities traded through GDT in 2017 were less than 10 per cent of that,” Mr Phelan said.
He said that the latest European market trends showed drought had moderated volumes from June and helped the prices of most commodities rally this month.
“All co-ops, especially those whose base prices have been allowed fall behind, must increase their August base price and be ready to increase it further before year-end as markets allow,” he said.
The Ornua PPI published in August for July trade was slightly down, but as always lagged behind market trends. In recent weeks, most product prices had rallied, said Mr Talbot.
He said that it was clear that reduced production from June due to drought in Europe was impacting market sentiment and dairy prices.
“Co-ops must ensure that farmers benefit from this, seen as the impact of weather on feeding costs in particular will hit their 2018 margins hard,” he said.
Source: Tipperary Star