Dairy sector faces price fluctuations

THE dairy industry will have to adapt to greater fluctuations in milk prices for the future, the Irish Dairy Industry Association, the IBEC group representing processors, warned yesterday.

It said that as Common Agricultural Policy market mechanisms are dismantled and export supports reduced, European dairy prices will be greater influenced by changes in world prices.

IDIA director Michael Barry said there are now fewer ways in which Europe can intervene to support dairy prices.

European prices are, therefore, more exposed to the cyclical nature of world dairy prices. He said world protein prices strengthened at the end of 2006 due to increased demand and reduced global supply. While it is too early to predict 2007 prices, Europe’s ability to export casein to the US this summer without casein aid is unknown.

In addition, casein output from other countries and increased usage of dairy protein substitutes must be considered in the global supply equation.

Mr Barry said with this level of uncertainty, it is too early to predict the likely market situation or to predict dairy prices for 2007. It would be good if the market supported current farm gate prices.

“However, with the removal of market supports, European dairy prices are moving towards world prices and temporary fluctuations must not be taken as long term prospects,” he said.

Mr Barry said the strong dairy market at the end of 2006 came too late to benefit Ireland’s seasonal production profile.