Co-ops maintain milk price despite market pressures

By Stephen Cadogan

Milk prices paid by the major co-ops for October are unchanged, despite the Ornua Purchase Price Index (PPI) falling from 110.4 to 106.5.

The PPI is a monthly indicator of market returns for dairy products purchased from co-ops by Ornua.

Glanbia will pay 32 cent per litre (cpl) including VAT for October manufacturing milk at 3.6% butterfat and 3.3% protein, unchanged from the September price. Glanbia Chairman Martin Keane said there has been a sharp reduction in dairy market returns, which is not being reflected in the group’s base milk price.

Lakeland Dairies held its base milk price at 32.78 cpl including VAT. A lactose bonus of 0.28 cpl will bring the effective Lakeland price for October milk to 33.06 cpl including VAT.

According to the co-op (where October milk supplies were up by 20%, year-on-year), global dairy market conditions have become decidedly weaker.

EU wholesale markets declined again in October, with fat and powder prices down.

Skim powder was down 2.5%, with butter down 8.1%.

However, the European Commission has issued an upbeat report on dairy markets, following last week’s tender sale of 30,000 tonnes of skimmed milk powder out of intervention, bringing to 190,000 tonnes the amount of powder sold without upsetting recovery of the dairy sector (half of the 380,000t bought into intervention since 2015).

According to the Commission, EU skim prices fluctuated below intervention level for the past year. But EU farm-gate milk prices have risen from 32c per kg in May to 35c in September, helped by EU butter prices staying over €5,000 per tonne for six months, and strong EU cheese prices, boosted by robust consumer demand.

Agriculture Commissioner Phil Hogan said: “There is, however, no place for complacency, and prudential production decisions must continue to be made by reference to the realities of market conditions.”

Cumulative EU milk production for 2018 is projected to end 0.8% ahead of last year.

However, strong supplies in New Zealand are being felt on markets, driving down futures market dairy prices for October.

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