Co-op cuts buck global dairy market trend

As world dairy markets continue to recover, the industry in Ireland has gone in the other direction, cutting peak supply milk prices.

The biggest buyer, Glanbia, will pay only 23 cent per litre (cpl) including VAT for May manufacturing milk, compared to 24c for April.

The May price includes 2c from Glanbia Co-op, and a 1c once-off bonus from Glanbia Ingredients Ireland (GII), which includes an Ornua bonus.

This leaves GII, processors of 1.8 billion litres, or 30% of Ireland’s milk, paying only 20c up front for manufacturing milk at 3.6% fat and 3.3% protein.

Glanbia Chairman Henry Corbally said the optional Glanbia Advance Payment offers up to 2 cpl of interest-free cash flow support in addition to the May milk price of 23c.

The board of Carbery also cut their May milk price, by 0.5c. It is now up to each of the four individual Carbery co-ops to decide if they will pass on this cut to farmers.

Lakeland Dairies cut the May price 1.5 c. However, a one-off 1c Ornua bonus keeps the price at 22.76c, at 3.3% protein and 3.6% fat.

IFA National Dairy Chairman Sean O’Leary said milk prices have fallen to a historical low, when dairy farmers had hoped for stable prices at worst, to reflect rising EU dairy commodity and spot milk prices.

ICMSA’s Gerald Quain said Irish prices are among the EU’s lowest, and farmers justifiably expected to see prices held, only to see them cut.

Meanwhile, the International Farm Comparison Network group of researchers and analysts said demand for dairy products will catch up with and exceed supply in 2016, and milk prices will rise, at a rate depending on disposal of stocks such as the EU’s intervention store. If stocks are held in storage longer, prices will rise faster.

ICOS, the Irish Co-operative Organisation Society, said this week buyers seem to be reacting to dairy supply slowdowns, with most recent Eurex indices showing butter up €370 per tonne, and skim milk powder up €60, since April.

However, ICOS calculated European quotes value milk at only 21c for Irish product mix constituents, and recent 2.6% and 3.4% increases in GDT auctions (before yesterday’s unchanged average GDT result, which included a 1.5% increase for skim milk powder), value Irish constituents at only 19c.

ICOS said the lower May Ornua index is worrying, but it only fell by 0.6; and Dutch spot milk prices are up to 23c per litre from 17c in April.

Meanwhile, moves to reduce EU milk production haven’t gone away, with EPP, the largest European Parliament grouping, supporting a temporary compulsory reduction, and a call for EU funds to support voluntary reductions coming from the agriculture ministers of Germany, France and Poland, which together produce over 45% of the EU’s milk.

They also made a strong proposal for the EU to allow member state aids of up to €30,000 per farmer.


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