Dairy exporters hit by refund cutbacks

EUROPEAN dairy exporters were hit by refund cutbacks as adverse euro/dollar exchange rates hit returns to farmers.

Overall, global dairy markets were more balanced that led to stronger internal market prices for dairy produce in the EU.

In its 2003 annual report, the Irish Dairy Board said the recovery of international diary markets was an important factor in keeping farm incomes from sinking further.

For 2004, the board sees that trend continuing, provided the euro does not get too strong against the dollar in the meantime.

International markets started to recover towards the end of 2002 and that trend continued into 2003.

In particular, the prices for butter and cheese products improved considerably over 2002, but as the Irish Farmers Association constantly points out, farm incomes are barely standing still and account for just half of farm income.

The other half comes directly in the post from the EU.

EU market prices for butter and SMP held at intervention level for the key summer production period. Consequently, the Irish weighted average return for butter and skim milk powder was at intervention equivalent in 2003. This is a 1.3% improvement on 2002, when returns were affected by intervention tendering for SMP.

World prices in 2003 increased, reflecting the upturn in market conditions and greater demand from some markets.

Australia’s drought resulted in a drop of 8.4% in milk production up to June 2003, and continues to impact on current output.

The Dairy Board said that provided no new import restrictions are imposed by the Russian authorities demand from that region should continue.

Poor returns in the US in 2002 and early 2003 led to an increase in US milk output of 0.2%.

Unusually hot weather in Europe disturbed milk production throughout the summer, leading to shortages in milk powder supply from Eastern Europe. However, milk output globally is estimated to have grown by 1.5%, representing a slowdown compared to 2002 but in line with average annual rises over the last decade.

The board said 2004 demand from Third Country markets is likely to remain positive.