THE announcement by Ornua (formerly the Irish Dairy Board) that their Product Purchasing Index (PPI) for the month of March was 100 points, 2.5 points up on the February level, merely reflected the increase during the month of the main commodity returns, especially butter and cheese, according to IFA National Dairy Committee chairman Sean O’Leary.
He said this should help firm co-ops’ resolve to hold the price through peak despite recent weaknesses in global dairy markets: ‘The PPI reflects the continued dairy market return improvements, which started from January, and have continued into March, and it vindicates our view that current milk prices can and must be held.
‘A PPI of 100 points is equivalent to a VAT-inclusive price of nearly 31 cent per litre, which is slightly above what most co-ops pay at the moment,’ Mr O’Leary added.
‘It is true that in the wake of two strongly-negative GDT auctions after six strongly-positive ones, EU commodity prices have eased somewhat. However, at an end March gross return still of around 35c/l before processing costs, I believe our argument for co-ops to hold prices remains fully justified,’ he claimed.
‘It will also be important for all co-ops to hold their April milk price too, as many farmers’ decisions around superlevy will have been made on the basis of the assumption – created by some co-ops’ commitment to this effect – that they would not lose out on price by holding milk for a short period at the end of March,’ he said
Mr O’Leary believes that the current weakness on dairy markets relates to the exploitation by buyers of the uncertainty around EU milk production in the coming months, now that quotas have ended: ‘I agree with the EU Commission’s analysis, which states that 2015 milk output will only increase by 1% (as against 4.5% last year).’
The ICMSA also believes that prices paid for milk during the forthcoming peak production months must be maintained. Tom Wilson, chairperson of West Cork ICMSA, said: ‘With serious superlevy bills facing farmers and with massive investment having taken place at farm level, the milk price that will be paid by co-ops in this April to June period will be absolutely critical to dairy farmers and will be the key barometer of milk processors’ ability to deliver for dairy farmers.’