Milk markets have stabilised after initial Covid-19 panic

Milk markets have stabilised after initial Covid-19 panic
Drinagh Co-op anticipates only 1c per litre milk price cut up to midsummer

Having increased their lead in the milk price league, West Cork farmers are set to stay on top, with Drinagh Co-op anticipating that the price for April milk will be reduced by 1c per litre, and that price should then prevail until midsummer.

For March milk from over 1,220 suppliers to the Bandon, Barryroe, Drinagh, and Lisavaird Co-ops, Carbery reduced the base price paid by 1.5 cents per litre but offset the reduction by the same amount from its stability fund.

That left Drinagh, for example, paying 33.07 cpl at 3.6% butterfat and 3.3% protein, including SCC bonus of 0.5 cpl and VAT at 5.4%. With Drinagh’s average butterfat at 4.19% and protein at 3.23%, their average March price paid was 35.1 cpl.

The Co-op now anticipates the base price going no lower than 32 cpl to midsummer.

Drinagh has also announced trading bonuses. For their average supplier milking 75 cows and purchasing all their feed and fertiliser from the Society, the milk bonus is €1,875 (5,000 litres per cow); the feed bonus is €1,125 (one tonne per cow); and the fertiliser bonus is €350 (35 tonnes). The total equates to €45 per cow.

Milk price hopes are boosted by European quotations for dairy products stabilising, following significant falls. Prices have remained above intervention thresholds, with the collapse in the foodservice market offset by stronger retail demand.

Tuesday’s Global Dairy Trade auction also pointed to relatively stable markets, with the overall GDT price index down 0.8%.

However, the outcome varied widely from the lactose price rising 7.9% to the butter milk powder price falling 10.3%. The butter price fell 5.8%, the skim milk powder price rose 0.1%.

The auction outcome was affected by New Zealand milk production, now approaching its low point of the year, falling 3% below normal April levels, due to droughts in the world’s number one dairy exporting country, after seven months of below-normal rainfall in some areas.

Nearer to home, the milk price fall in March was steepest in Belgium and Ireland, according to the LTO Netherlands Agricultural and Horticultural Association monthly survey of prices paid by 16 dairy co-ops across the EU.

LTO said the corona panic in the dairy market has subsided, and calm seems to have returned, but milk prices are expected to fall further in the coming months. FrieslandCampina has announced a price reduction of €1.25 in April and €2 in May (per 100 kg). Arla’s milk price doesn’t change in April, but falls by €1 in May. Milk price cuts are due at Savencia in April (€1.30 ) and Lactalis in April (€0.50).

Recent reports of extremely dry weather in the Netherlands, Germany and Sweden could curb supply, with EU milk flows up 1.2% year to date, and higher milk solids. Up to April, the Irish milk intake was 3.6% ahead of 2019. This increase will add to the challenge of processing peak milk with very little spare capacity, amid the threat of Covid-19 affecting co-ops staffs.

For Irish milk prices, gradual lifting of lockdown restrictions will be important to support demand, said an ICOS spokesperson.

ICOS has pointed out several flaws in the EU’s private storage aid scheme, for which applications open today. ICOS said the scheme time frame to June 30 is very short, as it is very uncertain if there will be market improvements by the end of June.

It could close earlier, as soon as applications use up the €30m budget.

The scheme cannot continue into 2021, as no EU budget has yet been agreed for next year.

For butter and skim milk powder, the aid rates are entirely inadequate, according to ICOS, 20-50% lower than 2014 levels, except for cheese storage rates which remain at 2014 levels. But Ireland has a disproportionately low cheese allocation.

The private storage aid scheme is another disappointing initiative from Janusz Wojciechowski, the EU’s agriculture commissioner, who must also now deal with the embarrassment of a flagrant Single Market breach in his native Poland.

The Polish ministry of agriculture has published on its official website a call on companies to stop importing milk and dairy from other EU member states. It said, “A list of plants that import milk and milk products from abroad, thus limiting purchases from Polish farmers. We publish it acting in the interests of everyone who cares about supporting the Polish economy.”

European Dairy Association secretary general Alexander Anton said, “Such a protectionist move is even more surprising when you see that Poland is exporting around 30% of its milk production.

For March milk from over 1,220 suppliers to the Bandon, Barryroe, Drinagh, and Lisavaird Co-ops, Carbery reduced the base price paid by 1.5 cents per litre but offset the reduction by the same amount from its stability fund.

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