As market improves, co-ops under pressure to increase milk prices

THE country’s dairy co-ops are coming under pressure to increase the milk prices they pay their farmer suppliers as the world market returns improve.

Irish Farmers Association Dairy Committee chairman Kevin Kiersey said the latest dairy trade auction results from Fonterra, the global New Zealand processor, was the clearest sign yet the market recovery that started a few weeks ago was far more than a flash in the pan.

He said as the Irish Dairy Board increased its March skimmed milk powder/butter payout by 0.43c/l, co-ops should increase their milk prices for that month to at least 27c/l. It was also both realistic and necessary for the co-ops to further commit to lifting milk prices to at least 28c/l + VAT before peak production begins in May, he said. Mr Kiersey said the increased Fonterra prices will help make European dairy products more competitive on the world market. It will also help lift their prices further before summer and this justifies further milk price increases well before peak.

With price increases of 21.9% for butteroil, 25.5% for skimmed milk powder and 21% for whole milk powder, New Zealand products are now priced slightly above European exports. Combined with the current weakness of the Euro relative to the US dollar, this means European exports will be very competitive without export refunds. “There is even scope for European export prices to lift further. The timing is particularly good as we come to the production peak,” he said. Mr Kiersey urged Irish co-ops to lift milk prices in order to give a well justified fillip to producers after the most severe income crisis this generation has experienced.

Irish Creamery Milk Suppliers Association Dairy Committee chairman Pat McCormack said the March payout from milk processors to farmers should increase to at least 27c/l to reflect the improved marketplace returns. The latest Fonterra auction has seen prices for skimmed milk powder and whole milk powder increase by on average 26% and 21% respectively and up to 36% for certain contracts.

Dutch quotations for butter and skimmed milk powder have increased by €50 per tonne and €60 per tonne respectively alone this week and are now returning a price in excess of 32c/l before processing costs and excluding VAT.

Mr McCormack said it is clear there is considerable room for improvement in dairy product prices in Ireland given developments on EU and world markets and this should be immediately reflected in an increased return to milk producers in the milk cheque for March.

With the huge debt levels on farm, co-ops have an obligation at this time to return in full these improved prices so farmers can get themselves out of financial difficulty as soon as possible. “For the farmers to do this, a strong milk price during the peak production months is absolutely essential.”