THE market data and sentiment for milk has shown steady improvements for the last two months and, according to West Cork ICMSA chairperson Tom Wilson, this must be reflected as processors set their milk prices over the coming weeks and months.
His association says that visible market rally, combined with the with expected supply reduction in the coming months, should see milk price improvements ‘feed back’ to the foundation and most vital element in the whole dairy sector: the farmer-supplier.
Latest Dutch Dairy Quotations for the end of June saw the Butter and Skimmed Milk Powder (SMP) product combination over 4 cents per litre higher than its lowest price at the bottom of the market in early April. This trend was also replicated in the Whole Milk Powder (WMP) market with an increase of 4cpl also gained since its lowest point in April.
In a situation where it takes a number of months for the spot prices to be reflected in farm level prices, farmers can be confident that increases in farm level prices are on the horizon. Mr Wilson observed that even if it is too soon to see those increases feed into the price for next month there could certainly be no question of any processor or co-op cutting milk price in the coming period.
Supply reduction is also feeding into the more positive sentiment on markets as a number of agencies foresee reduction in milk supply from the large production areas. Already, Argentina and Australia have reduced significantly due to adverse weather conditions, but it is the low price that will see production in Europe decline in the coming months. The EU commission has recently updated their prediction and are now forecasting that milk supply for 2016 will equal that of 2015 - given that we are well ahead of 2015 at present, sharp declines in milk production should be expected in the coming months.
‘This dairy income crisis is far from over for the famer on the ground; below-cost production has been happening for over a year and will continue until milk prices rises significantly. It is essential that all parts of the dairy supply-chain pass back the increased prices to the farmer-suppliers on the ground because it was never more badly needed.’