As dairy farmers braced this week for a Brexit impact, they also called for a consistent milk price rise to offset increasing milk production costs due to climate action and nitrate regulations.
IFA dairy chairman Tom Phelan said this week’s publication of the Ag-Climatise consultation document, and recent and pending increases in nitrate derogation requirements, make extra demands on them.
“It’s about time the marketplace delivered for sustainable milk production,” he said, after the Department of Agriculture’s Ag-Climatise roadmap called for major changes up to 2030, including a 20% reduction in use of chemical nitrogen.
It highlighted the dairy sector as a key focus area, because it has over 50% of chemical nitrogen usage (see more Ag-Climatise proposals on page 2).
ICMSA also weighed in with pre-Brexit milk price rise demands.
Their dairy chairman, Gerald Quain, said co-ops are “hedging” against a Brexit no-deal at farmers’ expense, by paying an inadequate milk price.
“Farmers cannot be paid for milk supplied last month on the basis of what co-ops fear might happen next month,” he said.
He said it’s imperative that remaining milk processors increase their price for November milk, after the first co-ops to announced November prices added between 0.5c and 1c per litre.
IFA’s Tom Phelan said there is scope for a 1c jump in milk price to reflect current market conditions.
Already, Lakeland Dairies has announced a 1c bonus for November milk.
The co-op said dairy markets are delicately poised, with buyers cautious as they wait to see how supply, Brexit, and Covid-19 will look early in 2021.
Glanbia has announced an additional payment of 0.5c for all November milk, to mark the launch of its Operation Biodiversity initiative to increase planting of native trees and hedgerows on its suppliers’ farms.
Glanbia chairman John Murphy said global milk supplies remain solid, with a rise expected year-on-year, and Covid-19 restrictions continue to impact the foodservice channel, but retail is performing well.
He said a Brexit trade deal is really important for the Irish dairy sector.
Kerry has also lifted its milk price for November, by 0.5c.
Meanwhile, Rabobank senior dairy analyst Andrés Padilla has explained why projections for the global dairy market in 2021 are more optimistic, after a challenging 2020.
He said several factors in 2021 aid positive consumer sentiment in key dairy markets, including Covid-19 vaccines, less political uncertainty after the US election, a weaker US dollar boosting commodity prices, and projections for economic growth in most regions after their 2020 recession.
He said dairy supply growth is slowing across primary export regions.
Milk production growth this year was at its highest level since 2017, increasing by an estimated 4.5bn litres, but Rabobank projects more moderate growth rate in 2021, albeit positive across all regions, totalling 2.7bn litres.
Grass-based producers like Ireland are likely to gain, as Rabobank projects higher soy and maize prices will keep dairy feed costs higher globally in 2021.
On the downside, Mr Padilla said a full recovery in global dairy demand depends on regaining pre-Covid sales levels.
He also warned that fiscal constraints will prompt governments to scale back dairy purchases and cash payments to consumers in 2021.
“This could limit demand growth, and impact global prices in 2021, if economic recovery does not materialise.”
The Chinese supply-demand balance could also deflate market optimism.
“We estimate that Chinese 2021 milk production will grow by 6% compared to 2020, slightly outpacing demand growth.
“The need for destocking could reduce imports from 2020’s lofty levels, and limit gains in dairy product prices.”
Global market optimism has been reflected in the Global Dairy Trade auction, with a 1.3% price rise Tuesday in the last auction of 2020, a third consecutive price rise in these important market-setting events.
The butter price jumped 6% Tuesday, and there was a 1.2% price rise for skim milk powder, another important commodity for the EU.
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