Report predicts rise in farm milk prices

A NEW report on the difficulties in the dairy sector indicates a gradual improvement in farm milk prices can be expected.

However, the Dairy Markets Review report indicates the recovery will be gradual and depend on a number of factors.

The report, published by Teagasc and launched at the National Ploughing Championships in Athy, Co Kildare, yesterday, was produced by a committee of dairy industry stakeholders and experts, and chaired by UCC economist Dr Michael Keane. As well as exploring the origins of the current crisis, the study examines the milk production and dairy consumption prospects in the major regions around the world over the next five years.

Teagasc director Professor Gerry Boyle said this extensive review of global dairy markets provides a valuable guide to future market prospects.

He said the report clearly highlights the factors that have contributed to the current market difficulties and identifies their relative importance.

The recession, weak dairy product consumption growth and a strong expansion in global milk production, are the key factors behind the fall in prices.

Teagasc economist Trevor Donnellan said the review has been completed at a time of major concern for the Irish dairy industry, arising primarily from exceptionally low dairy product and milk prices.

“Irish dairy farmers received over 32 cents per litre for their milk in 2008 and are likely to receive, on average, less than 23 cents per litre in 2009, a decline of almost 30%. As a direct result, many Irish dairy farmers will lose money this year,” he said.

The report says globally, milk production has been slow to adjust to the low level of milk prices. But there are now signs production is falling in some major milk producing regions. As the global economy emerges from the recession, a recovery in demand will also contribute to improved dairy prices, it adds.

Irish Farmers Association president Padraig Walshe said while the report paints a generally realistic picture of likely global developments on world dairy markets, it does not reflect the recent positive price trends, which have been visible on markets in the last few weeks. Mr Walshe said he believed the evidence from recent market developments contradicted the pessimistic assessment of the short- to medium-term outlook in the report. IFA Dairy Committee chairman Richard Kennedy said the current trends are definitely signs of a faster recovery than anyone expected, even a few weeks ago Lakeland Co-op paid their suppliers a bonus 0.5c/l on July and August supplies.

“I believe current commodity price increases justify Lakeland holding this for the month of September. For other co-ops, particularly those with the largest scale such as Glanbia, Dairygold and Kerry, there is now scope for at least 1c/l of a price increase,” he said.

Mr Kennedy said with production well back and intense cash flow pressure continuing on dairy family farms, co-ops must shore up farmer confidence by paying a stronger price over the coming months.