The Irish Dairy Board (IDB) has called for the immediate re- introduction of export refunds to prevent a surplus of dairy products building up in Europe. It has also suggested that super levy fines in 2014 and 2015 should be ring fenced for funding dairy market supports like export refunds.

Latest figures show that first half milk output in Europe grew by 5.4%. While underlying demand growth in Europe has remained steady at around 1% per annum, the market is under severe pressure due to a combination of excess supply and demand issues in two of world’s key buyers – China and Russia. In 2013 the EU exported 1.6% of its total milk output to Russia.

The IDB favours export refunds to remove the product surplus, rather than the recently introduced Aids to Private Storage which they fear could prolong market weakness into next spring.

Joe Collins, MD of Dairy Trading and Ingredients at the IDB, warned farmers to plan for lower returns “in the medium term”.

“While the PPI for August was 114.8, the spot return for product sold today is close to 100, which points to a farm gate price of less than 30 cent by the end of the year”.

The monthly index, which tracks the price paid by the IDB to member processors for a basket of dairy products, suggests a farm gate milk price of around 34 cent per litre (vat inclusive) for the products purchased in August.

The PPI opened this year at 133.6 for January, and has since fallen by 18.8 points, or 14%. The scale of the price fall on spot dairy commodity markets this year is far higher. Powder prices on the Global Dairy Trade auction are over 40% off their 2014 peaks, while the butter quote from the Dutch Dairy Board is 29% lower. The global growth in sales of Kerrygold and value added ingredients means the PPI is continuing to insulate product returns from the general market weakness.

IFA slams Dairy Board for "talking down" milk prices - read more here.