Despite the reductions in the Global Dairy Trade (GDT) auction last month, global demand for dairy products continues to grow at between 1.5% and 2%, the ICMSA’s Gerald Quain said.
Meanwhile, global milk supplies in January 2017 dropped by 1.7% compared to the same month in the previous year – with milk supplies lower in all the major exporting regions, apart from the USA, he added.
Milk supplies in the EU, the region where the majority of Irish dairy exports end up, are 3% lower, he said.
“The low milk prices of 2016 have resulted in a sharp fall-off in milk supplies and the ICMSA expects this to continue for the first half of 2017, which will have a positive impact on market returns.
“The Ornua Purchasing Price Index returns for February 2017 remained fixed at 105.4 or 31.4c/L, but this is based on a processing cost of 6.5c/L which we’ve always felt is is overly generous to the processors.
Given that most processors failed to reach 31.4cpl for January milk, the ICMSA is calling on them to increase milk price to at least 32cpl for the milk they received in February.
The decision by some processors to not increase their milk price for February supplies is disappointing and is inconsistent with demonstrable market returns at this time, Quain said.
“It is simply a fact that the market is returning a better milk price than 31c/L”, he added.
‘Irish Processors Lagging Behind Their European Counterparts’
Meanwhile, Quain believes that Irish processors have consistently lagged behind their European counterparts when paying for milk.
Looking at international milk price comparisons, it shows that Irish co-ops are continually paying a lower price to their milk suppliers than their European counterparts.
“Figures from the Dutch Dairy Board show that the Irish processors were over €3.40/100kg below the European average for the rolling 12-month average, up to January 2017.”
The average milk price paid across Europe in those 12 months was €28.41/100kg, the Chairperson of ICMSA’s Dairy Committee said.
The three Irish processors listed paid out well below that, at an average of €24.30/100/kg (excluding VAT) based on 4.2% fat and 3.4% protein, he added.
“Even more alarming is the fact that Irish processors are also well below New Zealand, at €29.28/100kg, and US milk prices, at €34.64/100kg, for the rolling 12-month period.
“These are the factual figures and farmers are rightly asking how can Irish processors be so far behind our competitors?”
Quain believes it is well past the time for Irish processors to step-up, in terms of paying a price consistent with market returns and keeping in-line with other international dairy processors.
“The gap that has developed is now inexcusable and must be closed”, he said.