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Good Dairy Outlook for 2017; Cash Flow Overhang Not to be Underestimated

22 December 2016

IRELAND - IFA National Dairy Chairman Sean O’Leary has said that continued milk price increases since July of between 5c/l and 7.5c/l have improved the confidence of Irish dairy farmers coming up to Christmas, but many bills remain to be paid, and cash flow concerns remain a top preoccupation.

He said he was optimistic for the 2017 dairy market outlook, but bearing in mind the financial pressures still on farms, he urged dairy farmers to prepare early in January to fully utilise the new SBCI/state funded low cost (2.95 per cent) cash flow loans IFA pressed for, which Minister Creed has stated will become available from the pillar banks and other lenders early in January. These will allow farmers to convert merchant credit, superlevy and other bills and make them more manageable.

“Irish co-ops have increased their milk prices by an average of 5.5c/l in the last five months, and I am clear that there is scope for further increases in the coming months. Over the same period, two of the largest European co-ops, Arla and Friesland Campina, increased their prices by 7.5 and 12.5c/kg respectively. With dairy markets remaining strong, there is scope for further milk price increases for Irish dairy farmers for this month’s milk and the coming months,” Mr O'Leary said.

“The outlook for dairy and milk prices in 2017 is positive, with global milk supplies unlikely to increase in response to improved milk prices over the medium term. Many farmers have been financially crippled by up to 3 years of low milk prices in all regions bar the US, and cow culls in the EU have increased by over 7.5 per cent this year to date,” he said.

“Global demand has also remained robust, with strong demand for butter and cheese in particular in developed countries. In emerging countries, ongoing exports of powdered products in particular have performed strongly, benefiting from the earlier lower dairy prices, but more recently from increases in oil prices,” he said.

“It is crucial that co-ops would continue passing back as much as possible of the benefits they are gaining from improved dairy prices. It is also essential that farmers who need it would ready themselves early in January to avail of the SBCI/state funded cash flow loans to convert outstanding bills, spread them out over slightly longer periods, and reduce their cost,” Mr O'Leary concluded.

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