IFA: Ornua May PPI Increase Shows Dairy Market Recovery Can, Must be Passed Back to Farmers

IRELAND - IFA National Dairy Chairman Sean O’Leary has said the 1.8 point increase in the May Ornua PPI to 106.8, equivalent to a milk price of 32c/l including VAT, after deduction of a 6.5c/l processing cost, vindicates IFA’s view that more of the dairy market recovery can, and must, be passed back to farmers in a May milk price uplift of up to 2c/l.
calendar icon 9 June 2017
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“The National Farm Survey shows farmers took the brunt of the dairy downturn, with a 17 per cent fall in 2016 incomes. While co-ops clearly supported milk prices in 2016, which reduced but did not eliminate profits, Irish dairy and ingredients exports increased 2 per cent to €3.38b, and the dairy recovery is continuing in earnest into 2017 – but farmers have not seen the full benefit of it,” Mr O’Leary said.

“Farmers’ incomes fell despite a 4.4 per cent increase in production. Milk prices increased around 7.5c/l between July 2016 and February 2017, but have stagnated ever since. While co-ops may be tempted to further rebuild their balance sheets, milk prices must now be further increased,” he said.

Farmers recognise the effort made by co-ops to support milk prices in 2016, and while this softened the blow, it did not protect farmers from significant income reductions and cash flow stresses in 2016, as highlighted by the NFS results published last week.

“Both global and EU dairy prices have been rising strongly in recent weeks, as confirmed in yesterday’s GDT auction, the 6th bullish one in a row. EU butter prices as quoted by the EU Milk Market Observatory for 28 May 2017 have increased by over 18 per cent since this year’s trough in early March.

"SMP prices have lifted over 7 per cent since late April, while WMP is up 6.5 per cent over the same period. Cheddar prices are up 5.5 per cent and whey powder prices over 7 per cent. An Irish product mix based on the quotes from the EUMMO would yield a current farm gate equivalent price, after deduction of 5c/l processing costs, of 33.52c/l + VAT (35.33c/l incl. VAT),” he said.

“We are very clear that, as co-ops have increased sales significantly in recent months, and as dairy prices are recovering to, in the case of butterfat especially, historical levels, there is real scope for further milk price increases to be passed back to Irish dairy farmers,” Mr O’Leary concluded.

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