The seventh-in-a-row positive Global Dairy Trade auction result on Tuesday took prices to their highest level since April 2014.
This important indicator of global dairy market trends offers reassurance on the milk price front to dairy farmers, and the Tuesday auction result also pointed to a slowing supply trend, with slightly reduced product volumes reflecting the passing of the milk production peak in New Zealand, the No 1 global dairy exporter.
At home, the country’s biggest milk buyer, Glanbia, has increased the creamery milk price from 33.5 cent per litre (including VAT) for December to 35.1c for January.
It includes a January seasonality bonus of 4c, and 0.42c ‘Share of GI Profit’.
Glanbia Ireland Chairman John Murphy said: “While lockdowns are having a negative impact on foodservice, they are positive for retail demand.
Milk supply growth is strong across all the main milk production regions, but rising feed costs may curb supply growth in the EU.”
The 35.1c price is for 3.6% butterfat and 3.3% protein. This is equivalent to 38.32c for milk of 4.2% butterfat and 3.4% protein.
Dairygold has maintained its January price at 32.311c (3.3%/3.6%) including bonuses and VAT.
In addition, a January early calving bonus of 3c will be paid.
A spokesperson said markets remain relatively stable.
The price works out at 41.2c for the average Dairygold January solids, or 35.353c at 3.4% protein and 4.2% fat, the European standard, which is closer to the average milk constituents in Ireland, which co-ops are now adding to milk price announcements.
Kerry Group will pay 32c for January milk (3.3%/3.6%).
A Lakeland Dairies spokesperson announced a base milk price for January, of 32.34c, unchanged from December.
Lakeland pays a special unconditional bonus of 1cpl for January, November and December. An out-of-season bonus of 5c, additional for participating suppliers, is paid for January and December, it was 3c for November.
A Lakeland Dairies spokesperson said commodity prices are unchanged, with general stability in the market. There are concerns, however, over the increased volume of US milk production.
According to Dairy Industry Ireland (DII), which represents the industrial manufacturing dairy base, the new 3.4% protein and 4.2% fat price information presents a consistent reference price and allows for better comparison with standard EU milk prices.
The current 3.6%/3.3% pricing model will be also used, for full clarity.
Milk suppliers will continue to be paid in accordance with their internal co-op constituent payment formula (A+B-C).
For example, if a processor pays €5.90 per kg of protein, and €3.605 per kg of fat, with a volume adjustment of 4c/litre, prices would be reported as 29.41c per litre (excluding VAT), at 3.6% butterfat and 3.3% protein; and 32.25c at 4.2% milk fat and 3.4% milk protein.
With 2019 average solids at 4.17% butterfat and 3.54% protein, DII said it is time to choose a new base which more accurately reflects the milk produced in Ireland.
The existing 3.6% butterfat and 3.3% protein price was more relevant at the 1990 average Irish milk fat of 3.51% and protein of 3.2%.
As well as in price announcements, the 4.2%/3.4% price will be added onto farmers’ milk statements from co-ops, as soon as it can be accommodated by local IT systems.
Implementation of the 4.2%/3.4% European standard was recommended in the Teagasc/CIT academic report on ‘An analysis of the Irish dairy sector post quota’ of October 2020.
The EU standard only applies for manufacturing milk. Winter and liquid milk contracts are the responsibility of individual processors.
DII said, with Ireland exporting 95% of its dairy production, for transparency purposes, “it is clear we need to move to a metric that can be internationally used”.
This will help in the development of tools to mitigate price volatility, such as fixed-price contracts and dairy futures.
However, farmers have reacted angrily to the new additional way of announcing milk prices.
IFA wrote to all milk processors outlining their opposition.
Acting Chairman of the IFA Dairy Committee Stephen Arthur said, “The representative structure of milk processors is being undermined by management.
Farmers have been side-lined. There is no consultation with elected representatives.”
IFA instead wants milk price stated on a €/kg of milk solids basis.
ICMSA Dairy Committee Chairman Gerald Quain said no decisions in relation to milk price reporting to farmers should be taken by an external body where co-ops are represented by management and not farmer board members.
“It is hugely disappointing that DII did not see fit to consult with other industry partners and stakeholders before announcing such a change to the media”.
He said this move could be presented as part of a concerted effort to undermine the milk price being paid to farmers, with pressure from processors to increase the processing cost on the Ornua PPI monthly indicator of market returns on dairy products as another example.
“If co-ops are going to publish data on a European solids standard, alongside the Irish standard metric of 3.3 and 3.6 solids, then they should also on a monthly basis publish where their milk price is relative to the LTO EU average and where in the EU league, their milk price stands.
“This would be real transparency, and they could explain why the Irish price is consistently near the bottom of the league.”
