12.1% SMP price jump boosts dairy farmers

Dairy farmers have been boosted by a Global Dairy Trade auction average price rise yesterday of 3.4% for dairy commodities.

12.1% SMP price jump boosts dairy farmers

The auction includes a welcome 12.1% price rise for skim milk powder, an important EU commodity.

The whole milk powder price dropped 1.7%, but Fonterra, the world’s largest milk exporter, had doubled the volumes of WMP on offer, in a bid to capitalise on recently rising prices.

Prices rose on average despite signals from Russia that the embargo against food imports from the EU and other western countries could continue for at least 18 months.

But markets have benefited from the European Commission proposal of a further increase in intervention ceilings up to 350,000 tonnes of skim milk powder, after 73,500t was bought into intervention in just one month.

The favourable GDT auction result backs up the views of many delegates at the recent annual Dairy Industry Newsletter conference in London that the world dairy commodity market has already passed the bottom.

They also welcomed positive signals such as rising prices in European futures commodity trading for the first time in months, and Dutch Dairy Board commodity prices rising.

And Fonterra has announced an improved milk price forecast for the upcoming 2016-17 season, albeit at a lower level than most analysts and farmers had expected.

However, the US Department of Agriculture’s Beijing bureau has painted a grim picture for Chinese demand, at least in the short term, predicting 2016 whole milk powder imports at their lowest level since 2006.

Here at home, IFA National Dairy Committee Chairman Sean O’Leary said, “Bearing in mind that spot milk and dairy prices, EU average quotes and international futures have all been firming, albeit timidly and from very low levels, it is fair to think that we are seeing the first signs that global supply and demand has slowly started to rebalance”.

Mr O’Leary has defended farmers in the Netherlands, Ireland and Germany, who led expansion of EU milk production, pointing out they have only 16% of their extra milk sitting in intervention or APS schemes.

“This compares with Belgium with 86%, and France with 68% of their milk reliant on those market support measures,” Mr O’Leary said.

“It is simply a fact that expanding production just because one can, and without a marketing plan, is not wise.”

EU Agriculture Commissioner Phil Hogan said this week the dairy crisis continues and “more has to be done”.

“That raises the question about whether the CAP provides the most appropriate means to address such a deep and long-lasting crisis or whether we need to have other instruments at our disposal, ” said the Commissioner.

Milk deliveries in the EU increased by 7.2% , or 2.6 million tonnes, in the first three months of this year, compared to 2015.

With US production up about 1%, global production was up 3.9%, despite production falling 2% in New Zealand and 1.2% in Australia.

Meanwhile, German Agriculture Minister Christian Schmidt has announced at least €100 million of aid for the country’s dairy farmers, in the form of immediate loans, guarantees and tax relief.

He said that he also wants farmers to cut their milk production to stabilise the dairy market.

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