30.5c a litre for Glanbia’s 30% milk pool

Glanbia Co-op moved this week to hold the manufacturing milk price for March supplies at the current 30.5 cent per litre including VAT — despite Glanbia Ingredients Ireland (GII) reducing the base milk price by 1c, to 29.5c. GII cited current weakness in global dairy prices.

Glanbia Co-op has also committed to support the April and May milk prices at 30.5c, if necessary, and in the absence of any significant unforeseen circumstances.

Suppliers of 1.8 billion litres of milk, or 30% of Ireland’s milk pool, will benefit from the co-op’s commitment to ensure stable milk prices for the early months of the year.

Milk suppliers to GII who have signed a Milk Supply Agreement (MSA), and who become members of the co-op at any time during 2015, will be eligible to participate in all 2015 milk price supports provided by the co-op.

This policy will start with a bonus of 1c (including VAT) for March milk to members who supply manufacturing and liquid milk.

The Glanbia move came after Eurex butter and skim indices showed a significant, consistent weakening of markets in the past month. This was equivalent to 3.3c per litre in milk value lost since early March. And weakness in global dairy prices was confirmed yesterday when the average product price slumped 3.6% in the GlobalDairyTrade auction for internationally traded commodity dairy products.

It’s the third GDT auction in which dairy product prices decreased, following a mini-recovery in world milk prices from December to February.

The GDT index, an important measure of global dairy prices, is now more than 20% behind its level of mid-February.

Yesterday’s auction results ranged from a 7.8% price fall for skim milk powder to a 2.7% price rise for cheddar.

According to ICOS, recent Eurex indices suggested a milk value of around 26.6c per litre including VAT, significantly lower than current milk prices paid by co-ops.

However, higher butter and cheese returns enabled Ornua (the new identity of the Irish Dairy Board ) to raise its Purchase Price Index monthly indicator of market returns for March, from 97.5 to 100.

According to ICOS, current market weakness is due to a combination of buyers’ expectations of a post-quota EU milk flush, and significantly greater than expected late season production in New Zealand.

ICOS says the market effect of the so-called “drought” in New Zealand was over-played. Fonterra, which processes 90% of New Zealand milk, says milk solids last month were down only 3% year on year, having recovered from 6.8% down in February. But dry conditions continued across most dairying regions, and South Island milk solids were down 6.8% last month, only a small improvement on the 8.3% decline reported for February.

In the EU, the largest milk producer in the world, production flatlined in January, the first month without growth since June 2013.

Ireland had the largest drop-off in production, But with EU milk quotas gone, dairy product buyers are closely looking at milk flows in Europe, and markets will respond to the emerging figures. EU production in the first half of 2015 is predicted to be 1% lower than 2014, but 1% higher in the second half. US milk production was up 1.7% in February; the USDA predicts 2015 growth of 2.47%.