The announcement by Ornua of a 1.6 point increase in their Product Purchasing Index to 105.4 points bears out IFA’s view that at least 1cpl price increase is fully justified on January milk, according to the farm organisation.
Ornua has stated that this is equivalent to a milk price of 29.8cpl + VAT (31.4c/l including VAT),
And IFA dairy chair Sean O'Leary said that lower payers, including Kerry, needed to aim higher than 1cpl to be fair to their suppliers.
Most co-op boards are due to meet this week and next to examine milk prices payable for January.
They must make sure the new increased 5.4 per cent VAT rate benefits the farmers fully, and pass back a fully justified increase of at least 1cpl back to support their milk suppliers’ essential income recovery before peak, Mr O’Leary said.
The demand for a price increase was also backed by Gerald Quain, chair of ICMSA Dairy Committee.
Last Wednesday's 1.3 per cent GDT price increase belied the slight easing in spots and futures of recent days. This is because buyers realise that the global milk production scarcity which has been developing for months is now compounded by the Northern Hemisphere only starting to creep up towards peak, and Oceania’s output rapidly falling seasonally, said Mr O'Leary.
“EU market returns throughout December and January have exceeded 37c/l gross (equivalent to a farm gate price of 32c/l + VAT). Irish SMP prices have caught up with EU averages in January, with butter now even exceeding that figure,” he said.
The national dairy chair said that as December 2016 figures became available, it was very clear that, other than the US, all dairy regions were seeing production fall.
In the EU, France is back an estimated 7 per cent, the UK around 5 per cent, Denmark also 5 per cent, Italy 4.5 per cent, Belgium 12 per cent and Spain 2 per cent.
New Zealand production is down 2.75 per cent for December, while Australia’s is back 4.1 per cent.
Argentina’s December output is down by a whopping 19 per cent.
While December US production recorded a 2.4 per cent increase, global milk availability is continuing to shrink rapidly.
“Milk price increases continue to be justified, and the National Dairy Committee will continue to lobby board members to deliver fully back to farmers what significantly stronger market returns allow,” said Mr O'Leary.
Meanwhile, ICMSA's Gerald Quain said that his organisation was anticipating a milk price rise as co-op boards meet to set price for January supplies.
Mr Quain noted that Friesland Campina, the giant Dutch dairy co-op, had increased its milk price for February to now stand at €35/100kgs or 33cpl.
He said that this was an increase of €0.50 per 100kgs on last month and provided a clear indication of the level of confidence at processor level in mainland Europe which must begin to be reflected in the price being paid Irish milk suppliers by their co-ops.
“We’d be looking at a rise of one cent per litre giving an average of 31 C/L for January milk,” he said.