Dairy sector keeping close eye on global price moves

Dairy farmers are keeping an eye on co-op milk prices as mixed signals are emerging from global markets.

While New Zealand dairy giant Fonterra says dairy prices will only pick up slightly in the next 12 months, signals from France Agrimer and Germany’s ZMB suggest there is no sign yet of the “wall of milk” predicted for the post-quota era.

These companies’s milk supplies for the January to mid-May period were significantly below last year’s level, by 2.45% for France and 2% for Germany. Those two countries alone account for over 40% of all milk produced in Europe.

IFA dairy chairman, Sean O’Leary, said: “Commodity prices have been easing, but with the exception of SMP (skim milk powder), they remain above recent GDT (global dairy trade) quotes.

“EU butter and WMP (whole milk powder) prices are over €400 higher than GDT’s May 19 prices, while Cheddar cheese prices are €700/t higher. While EU SMP is only €100 dearer than the latest GDT price, returns from EU SMP/butter are 5c/l higher.”

He said with droughts in California and an El Nino event declared for Australia that could also affect New Zealand supplies, the global supply/demand balance may tip over sooner rather than later. Thus, he urged co-ops to continue to support milk prices at least for May milk.

However, Fonterra has kept its forecast payout price to farmers for 2015/16 below the long-term trend. The NZ co-op increased its initial forecast for its farmgate payout price to NZ$5.25 (€3.47) per kg of milk solids from NZ$4.40 this year.

Glanbia, which collects about a third of all Irish milk, has pledged to keep its current milk price through June, and most other co-ops expected to do likewise.


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