Covid-19 impact hits farmers' milk cheques
The first March milk price announcement has revealed a reduction of 1.81c per litre, compared to February. It came from Lakeland Dairies, which said the fallout from Covid-19 is having a dramatic impact on the dairy markets.
It follows Ornua cutting its monthly indicator of market returns for dairy products, to 106.4 for March, from February’s 111.6.
A Lakeland Dairies spokesperson said, “As the Covid-19 pandemic has continued across the globe, the global dairy markets have collapsed.
“The food service sector across Europe has suffered near wipe-out following the closure of restaurants, cafes, hotels, while airlines have grounded many planes. "Food service is an important route to market for Lakeland Dairies and many dairy processors across Europe.
“Prices for butters, powders and cheeses are under significant downward pressure, as food service milk is now flooding into powders and butter.
“Closer to home, sales of fresh milk and butter in retail outlets have increased somewhat, but this increase has not offset the drop off in sales in the food service market.
“Reports from the UK and the USA where farmers have been forced to dump to milk as a result of a fall-off in demand, mainly in the food service sector, have had a serious negative impact on the market.
The markets are difficult at present and Lakeland Dairies will continue to monitor developments closely in the coming days and weeks.
Ornua’s PPI is a reference to how the general dairy market is performing, which may help to guide expectations around likely returns for dairy products and the milk used in their manufacture.
The PPI reduction reflects Ornua’s earlier warning that it expects Covid-19 to negatively impact on its business, with uncertainty and disruption already severely affecting markets.
Ornua CEO John Jordan said, “Consumer usage occasions have changed overnight, with people at home cooking and baking. As a result, in retail, Ornua is seeing an increase in demand for its branded and private label cheese and butter. Meanwhile, demand for Ornua’s foodservice products have fallen sharply caused by the temporary shutdown of the foodservice and hospitality sectors in Europe and the US.”
“The net impact of Covid-19 is a decrease in consumption of dairy products worldwide.”
The March 2020 PPI (which has a 2010 base at 100) is still the highest for the month of the past four years.
In 2019, it ranged from 104.1 in March to 107.7 in December.
In 2018, it ranged from 100.4 in March and April to 111.8 in January.
In 2017, it ranged from 105 in April to 116.4 in October.
In 2016, it ranged from 81 in May and June to 103.8 in December.
Ornua is Ireland’s largest exporter of Irish dairy products, to 110 countries.
It purchases 400 million litres of milk equivalent in products from member co-ops, under fixed-price contracts.
Ornua says it is in a strong financial position to manage the unprecedented challenges presented by Covid-19, according to the dairy exporter’s operating and financial results for 2019, which included an operating profit of €49.1 million.
