The May milk league table published below reflects the second round of milk price cuts as a result of the global supply and demand imbalance.

The cuts to the June milk prices announced by processors over the last ten days are summarised in Table 1 on the facing page. These June prices begin to show the seriousness of the situation in terms of dropping milk output values for farmers.

Glanbia and Thurles Centenary top the May milk league table. Remember, Glanbia Ingredients Ireland (GII) cut its base price for May milk to 27.5c/litre but used funds from the Glanbia stability funds to prop up the price by 3c/litre. Non-shareholders will get paid these top-ups retrospectively when they purchase a minimum of 2,000 shares. Thurles Centenary, which supplies a large proportion of its milk pool to GII, decided to hold its May milk price in line with Glanbia.

Arrabawn, which topped the April league table, has fallen down into division 3 after cutting its May milk price by 2.1c/litre. Kerry was close to the bottom of the April milk league and now it is at the very bottom for May as it decided to cut its May milk price by 2c/litre. In recent days Kerry has decided to hold this May milk price for June. They might have beaten the Cork lads at the football, but they are getting hammered by them on milk price.

The small west Cork co-ops trading as Carbery remain in division 2 as collectively they decided to cut May milk by 1c/litre on top of the 0.75c/litre April cut. In the last few days, Carbery has decided to cut June milk price by 1 c/litre again, reflecting the continuing milk price slip.

Explanation

On top of the strong milk league price, the four co-ops in the Carbery group pay a bonus of 0.5c/litre for milk with an Somatic Cell Count (SCC) of below 200,000 during the summer months – this is not included in the milk league ranking because it’s not paid to everyone. Conditional bonuses like that are not included in the monthly milk league, but all co-ops would get the benefit of any money paid out on this to farmers in the KMPG/Irish Farmers Journal annual milk price review.

The Irish Farmers Journal monthly milk league ranks processors on the price paid for a kilogramme of milk solids, using the average milk fat and protein for last year (3.99% fat and 3.43% protein) in the calculations.

For a spring milk producer with a typical May supply pattern (14% of total supply) there is a €1,000 difference between the top player in the league GII and the bottom payer Kerry for the standard litre of milk (at 3.99% fat and 3.43% protein). That’s a difference of €17 per cow (assuming a 60-cow herd) for May alone for a farmer in Kerry or Kilkenny who is doing the very same work but getting a very different price.

The May milk league is based on milk with a SCC of 250,000 and TBC of 30,000. Figure 2 shows the April milk payment using the average co-op solids that the processor collected. Co-op solids will vary from co-op to co-op and region to region.

June cuts

Over the last ten days the downward trend in milk price announcements continued. Yesterday Monaghan cut base June milk price by 1c/litre to 28c/litre. Earlier in the week Dairygold, and Carbery decided to cut June price by 1c/litre while Aurivo also cut their base milk price, but is drawing from its stability fund to keep its June farm gate price unchanged. The move will see the June Dairygold price fall to 25.7c/litre plus VAT (27c/litre total).

The price paid to Arrabawn suppliers for May was 27.4c/litre excluding VAT and transport so the June price will be close to 26c/litre base after the decision to cut 1.5c/litre for June.

On Tuesday, the Glanbia board agreed a June price of 28c/litre. However, while the base Glanbia Ingredients Ireland (GII) price for June will be 26c/litre – this is then supplemented by 1c/litre from its stability fund and 1c/litre from the Glanbia co-op.

The Glanbia co-op support for the May price was 3c/litre.

Figure 3 shows the range in milk prices as published by the EU’s milk market observatory.

Lithuania is bringing up the bottom of the table and this ties in with the news this week that the Lithuanian government yesterday (Wednesday) applied for dairy intervention from the European Union, with more than 1,000t of milk powder expected to be taken off the market in the coming weeks.

Lithuania yesterday put 606t of skimmed milk powder (SMP) into this week’s round of notifications to the European Commission and around 520t are scheduled to be offered in the coming weeks.

This is the first time an EU member state has used intervention since the scheme opened last September in the wake of the Russian ban on European dairy products. The farmgate base milk price in Lithuania is currently around 20c/litre and the intervention price is 21c/litre.

The weighted average EU price is close to 30.5c/litre. The prices quoted in this graph are sourced from the milk market observatory. They are estimates for June milk price from DG Agri (EU) and estimates from member states.

The British price is listed at 32c/litre but we know from our friends in Northern Ireland and from prices in Britain that many producers are accepting much less for their milk, with prices as low as 14p and 15p per litre the only option for some. The NI base price for June is close to 19p/litre (28 c/litre).

New Zealand

The Board of Fonterra will consider its current farmgate milk price forecast for the 2015/16 season, which is just starting now with cows beginning to calve, at its next meeting on 7 August. The forecast, which currently stands at NZ $5.25/kg of milk solids (21.7c/l), is under downward pressure after a series of sharp falls on the GDT (Global Dairy Trade) auction platform.

US milk price

Reported US milk price for May was down at US$16.70 per cwt, which is near a five-year low and a long way back from $24 last year but with currency conversion and at solids of 3.3% protein and 3.6% fat, it’s the equivalent of 35c/litre.