8% price rise as EU milk market heats up
These factors have forced milk powder prices to their highest ever level in the global dairy trade auction conducted by Fonterra, the New Zealand co-op which dominates global dairy exports.
Already, an 8% guaranteed milk price rise was announced this week for the whole of 2013 for farmers supplying FrieslandCampina, one of Europe’s leading dairy co-ops. Suppliers to the Dutch dairy giant will get 37.6c per litre.
Here, IFA says there is a real opportunity for Irish processors to capture market share from global competitors at very favourable prices, and they should encourage farmers here to produce more milk, by lifting prices before supply peaks. Current market returns justify 34 cent per litre and are rising, according to IFA.
ICMSA dairy chairman Pat McCormack said that inaction of the Irish Dairy Board and co-ops in the hugely strengthened dairy market was compounding an unprecedented financial crisis on many family farms: “ICMSA expects every board in the country to deliver on a minimum 35 cents per litre milk price in the next round.”
International prices holding firm for at least six months is predicted by leading global agri-bank Rabobank, with a sharp divergence in prices between different dairy products slowly abating.
Total milk production in exporting regions will fall below last year’s levels, mainly due to the most widespread drought of 30 years in New Zealand, the top dairy exporting country.
But weak northern hemisphere supplies this year, and poor profitability on US farms are also hitting supply. Many dairy farms in the US are still grappling with the drought conditions which devastated crops last year.
Argentine output slumped 26% in the November-to-January period, and on the demand side, Chinese imports soared 68% in January.
The worst New Zealand drought in decades has been officially declared over all of North Island and more recently in part of the South Island. The North Island produces 61% of the country’s milk and includes Waikato, the No 1 milk producing province. Over the past five weeks, pasture growth rates have been virtually nil in affected areas. Even if pastures recover, milk output will take time to recover, with farmers having culled animals to save on feed. Dairy cow slaughter rates are 45% above the five-year average. The drought could cost the New Zealand economy €1.3bn.
