Glanbia raises its milk price as tentative recovery continues

The IFA has welcomed Glanbia’s decision to add 1c to the price per litre being paid to suppliers, effectively lifting its August milk price to 28.09c/l plus Vat.

Glanbia’s move follows months of rising milk prices across most European auctions, coupled with US and New Zealand industry predictions of supply shortages.

IFA national dairy committee chairman Kevin Kiersey has called on the other co-ops to follow Glanbia’s example and raise their price to match the strong market recovery.

Mr Kiersey said: “As international milk supply and demand rebalance much more rapidly than expected, commodity returns have increased massively since May.

“Global buyers now realise that droughts in the US and Russia are making grain and feed dearer and curtailing US milk supplies, while weather factors have also induced a fall in EU supplies. As a result, they are now willing to pay significantly more for dairy products, as evidenced by the 3.5% and 7.8% price increases in the August Fonterra auctions.

“We in IFA have highlighted over the last two months the continuing significant improvements in European and international market returns, and the move by Glanbia reflects some of this.

“European market returns have improved even more, by up to 8c/l for EU spot butter/SMP quotes as of last week, and indeed EU dairy market prices are still rising.”

IFA milk executive Catherine Lascurettes said the price trend looks even more positive when charted back to European prices in late May.

The average joint price for SMP and butter is 35-36c/l at present in Europe, which is 7c up on late May. Taking out the nominal 5c/l to the processor, the correct price payable to the milk supplier could arguably be viewed as being 31-32c/l.

Ms Lascurettes said: “By increasing its price, Glanbia has made it clear that they can see that the market is moving upward. We believe that there is scope for further price increases down the road.”

Meanwhile, the latest Dairy Digest from co-op umbrella body Icos notes that European markets have strengthened recently.

Icos stated: “The Eurex index of German, French, and Dutch price quotations reports butter prices having moved up slightly to €2,745 per tonne, with SMP quotes having moved to €2,245 per tonne. The resultant milk price would be of the order of 25c per litre, for many Irish solids, an improvement on the market position in May, but still well below current Irish milk prices.”

Icos noted that the Fonterra auction of last week confirms the strengthening market position, and that the average WMP price of $2,675 (with the euro worth $1.24), would convert into an Irish milk price of about 22c/l.

However, while the IFA accepts the accuracy of these calculations, the group’s position is that the European markets are a more relevant indicator by which to measure Irish milk prices than the New Zealand co-op Fonterra, a market in which Ireland does not sell any milk.

The IFA noted that the bulk of Irish dairy products is sold in the European markets, where the prices for all of the main commodities — with the sole exception of cheese — have been steadily rising since late May.