Ornua Purchase Price Index worth 27.9c
The new PPI translates into a 27.9 cent per litre (VAT inclusive) milk price, based on Ornua’s product purchase mix, and assumed costs of 6.5ppl.
“It reflects higher returns in the month across all main products,” said an Ornua spokesperson.
However, ICMSA dairy chairman Gerald Quain said market returns justify a 30 cents price for October.
IFA dairy chairman Sean O’Leary said his dairy committee has unanimously agreed that a 3c/l increase for October milk is both necessary and fully justified, in line with what Arla (+4p/l in the UK since August) and Friesland Campina (+3.75c/kg for November, and a total of 8c/kg increase since August) have been doing.
Mr O’Leary said, “Farmers are still receiving milk prices below production costs, and it is crucial that every last cent fast improving market returns make possible be passed back to farmers.”
Dairy market recovery is attributed mainly to global milk production growth slowing to 1.15%.
The threat of a 26% cut in Dutch milk production (equal to a 2% cut in EU milk production) could also spur more dairy product buyers around the world into action.
However, the possibility of continued growth in the US dairy industry limiting global price recovery has been illustrated by reports from Dean Foods, one of the world’s top ten milk processors, and No 1 in the US.
It has forecast prices of liquid milk rebounding 11.7% month-on-month, although still marginally below year-ago levels, the latest of a series of positive signs for dairy markets in the US — including US cheese production volume hitting a September record, the highest for 54 years.
Despite unfavourable currency exchange rates, the US exports the dairy products from about 14% of its 96bn litres of milk per year, which is still growing, benefiting from low grain feed prices.
However, the Donald Trump presidency could result in a more protectionist US approach to trade deals, which could in turn restrict US exports.
