Angry dairy farmers react to milk price cuts at co-ops

The Dairygold Co-op board has maintained the March milk price at the February level of 31.19 cent per litre (cpl), including VAT, and a 0.65cpl quality and sustainability bonus.

Kerry has also announced an unchanged milk price, but Glanbia and Lakeland played safe and cut their March price.

A press statement from Lakeland Dairies (which knocked 0.5cpl off the February price) said weakness in the European markets continues, especially for butters and powders, driven by Brexit uncertainty, and persistently high volumes of dairy products in storage. Fluctuation in the euro–sterling exchange rate was also “a significant contributing factor”.

But the Global Dairy Trade (GDT) auctions in New Zealand were “a market positive”.

Glanbia suppliers will get 1cpl less for March milk, compared to February.

Glanbia Chairman Martin Keane said the global milk supply growth is lower than in previous years, and oil prices have increased, but market demand in some regions was being adversely affected by challenges that include lower economic growth, Brexit, and trade wars.

Butter prices have weakened, and the market is currently working through the large volume of intervention powder stocks that were purchased late last year.

IFA’s Dairy Chairman Tom Phelan said the decision by Glanbia and Lakeland to cut their respective milk price was a big blow for farmers.

“When you consider that Ornua will be paying a €19m year-end operating bonus to member co-ops, up 27% on last year, you’d have to say the decision by Glanbia, in particular, is completely unjustified,” he said.

ICMSA Dairy Committee chairman Gerald Quain said dairy farmers were entitled to be both cynical and very angry.

However, a new worry has emerged for Irish co-ops, in the shape of the United States government proposing additional import duties on a selection of EU dairy products, as part of a wider $11bn range of tariffs.

A preliminary list of targeted dairy products includes yogurt, butter and cheese, with the largest impact expected on cheeses, including speciality European cheddar, a market which Glanbia recently entered. The EU exported just under 134,000 tonnes of cheese to the US in 2018, and about 75% of this volume could be affected if all the proposed tariffs are implemented.

The US is proposing the tariffs because the World Trade Organisation recently ruled that the EU gave illegal subsidies to airplane manufacturer Airbus, giving the company an unfair advantage over others, including Boeing in the US. Because of this, the US is allowed to impose additional tariffs on imported EU products.

On the other hand, a low double-digit increase in Chinese dairy imports this year is predicted by market analysts at Rabobank, unless the China-US trade war escalates.

Chinese demand is powering New Zealand’s 10-in-a-row GDT auction price rises since December 4, including a 0.5% grain last Tuesday. But it highlights dairy market volatility, only partly reversing 13 auction index falls in a row in 2018. The index fell 26% then.

But Rabobank analysts say dairy price prospects are good on the other side of the world, and commodity prices will remain elevated to mid-year at least, due to a global supply crunch, exacerbated by a 10% production slump in Australia over the last three months.

Annual growth in New Zealand’s milk production is expected at only 3%, with their dry summer spoiling what promised to be a record year.

The GDT butter index rose 3.5% Tuesday, a tenth consecutive rise, totalling 42% since the start of the year.

It could rise further on Chinese demand, due to that country’s food social media fad around “muddy buns”, which has boosted demand for butter.

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