DESPITE a slight weakening of base milk prices in early 2018 being predicted, prospects should remain stable going into spring and as the sector approaches its peak production period.
The Ulster Farmers’ Union dairy chairman William Irvine says a number of factors are thought to be behind this holding of farmgate prices.
He said: “Commodity prices in early 2018 are providing better returns than what was anticipated at the end of 2017, with butter seeing a €500/tonne increase in the Netherlands.
“Only skimmed milk powder (SMP) showed a downward trajectory, and some in the industry have indicated that this, along with the c.370,000 tonnes of SMP in intervention stores are providing an ominous overhang on sentiments as we carry on into 2018.”
However, the dairy chairman said the price of SMP will not impact on Northern Ireland’s farmgate milk.
He explained: “Last week I attended both COPA-COGECA Milk Working Group as well as the European Commission Civil Dialogue Group meeting on Dairy, where I heard another angle on this story. There is no doubt that SMP prices are currently being impacted upon by the SMP intervention volumes, with the European Commission acknowledging that there may be a short term downward correction in SMP price.
“However, in relation to the NI product mix, unlike butter and cheese, SMP is not a significant part of the local mix and therefore its price does not impact upon local farmgate prices.”
With regard to the existing SMP intervention stocks, there is cause for optimism rather than gloom, according to the union. European Union export figures, as well as growing Chinese imports are showing a growing demand for SMP.
Mr Irvine continued: “According to the latest report from the Milk Market Observatory, 2017 saw record EU export levels for SMP. This was reaffirmed by a senior European Union Commission official, when addressing a recent major dairy conference in Glasgow, adding that should these export levels continue, it will only be a matter of time before the Commission will have to access intervention stocks to meet demand. Added to this, EU SMP production was down 2.6 per cent in 2017.”
Meanwhile in China, SMP imports were 46,493 tonnes, also up by 41.7 per cent in January (on January 2017). Whilst almost 90 per cent of the Chinese SMP import market is shared between NZ and Australia, EU Member States managed to increase their joint share to five per cent of the imports and this will grow in 2018.
Mr Irvine concluded: “In light of these facts, the UFU expect to see a stabilisation in base milk prices as we approach the spring.”
This comes following criticism from the European Milk Board (EMB) of the European Commission’s “dumping tactics” after intervention SMP was sold at its lowest price yet.
At the end of February, the European Commission sold over 4,300 tons of skimmed milk powder at a set minimum price of €110/100 kg.
“This has been the lowest selling price since the beginning of the tendering process and has been met with severe criticism from European milk producers,” the EMB said.
Dumping milk powder in this fashion is very dangerous considering the current market situation and makes conditions even more difficult for milk producers, Romuald Schaber, President of the EMB, said.
He pointed to German and Belgian dairy farmers who have reported a price reduct-
ion of about 4-10 cents in past weeks as a
sign of a downward trend beginning in milk prices.