Milk prices increase over fears volumes will decline

Amid the disruption on world markets, Irish dairy farmers are hopeful that a good grass growing season will help keep costs lower here than competing regions.

Predictions that dairy export volumes will decline globally all through 2022, and maybe all through 2023, are reflected in continuing milk price rises for Irish farmers.

Lakeland Dairies kicked off the February milk price announcements with a 2.5 cent/litre increase. Farmers will get 43.5 cent/litre inclusive of lactose bonus and VAT, for milk at 3.6% fat and 3.3% protein. That leaves the average price paid at over 47.19c.

The co-op said dairy markets have stayed positive as supplies fell from other dairy producing regions around the world. “All dairy markets are good, however, on-farm and factory processing costs have increased significantly,” said a spokesperson.

Glanbia has added 1.5c to the base price for February. With the seasonality bonus falling 1c, and the sustainability payment staying at 0.5c, suppliers will get 45.08c for February creamery milk, up from 44.58c for January milk (3.6% fat and 3.3% protein). At 4.2% fat and 3.4% protein, the February price is 49c.

Glanbia Ireland chairman John Murphy said: “Dairy market prices are currently at historic highs and demand is strong due to curtailed milk supply globally.

“With unprecedented inflation and global supply chain challenges, our commercial, logistics and agri teams are all working closely with our suppliers and our customers in this dynamic situation. The Board notes the emerging concerns at European level regarding food security and will continue to closely monitor developments.” Globally, drought in South America can be added to the reasons behind expected unprecedented falls in dairy supply.

However, on the demand side, Rabobank experts expect China, overstocked with dairy imports, to cut them 30% in 2022, and not to resume import growth until the first half of 2023.

However, oil-rich countries may increase dairy imports, as their gas and oil earnings increase.

Other importing countries may also scramble to build up stocks to secure levels ahead of trade disruption by war. As for Ukraine and Russia, they are not major importers of dairy products.

Rabobank expects a 0.5% fall in EU dairy production in early 2022. Any supply recovery could be affected by the Netherlands and Belgium proposing 30% dairy herd cuts by 2030, to lower nitrogen emissions.

Farmers in New Zealand, a leading dairy exporter, are struggling to restore supply after a poor peak season.

The rising costs of inputs, lack of labour, unfavourable weather, and variable feed quality and prices continued to limit production responses to rising milk prices around the world, even before the war in Ukraine started to impact on trade in grain, fertilisers, and energy, the key exports from Russia and Ukraine.

Irish dairy farmers will hope they can weather the disruption with the help of a good grass growing season to keep costs lower than competing regions.

Recent data from the International Farm Comparison Network showed Irish dairy farmers in mid-pack for dairy profitability rankings. But the figures were for 2020, and rising costs in the meantime may peg back profitability leaders such as France, Italy, Poland, Denmark, and the UK, more than Ireland.