The bottom six processors in the July Manufacturing Milk League account for over 70% of the southern milk pool and the price range is between €3.45/kg MS and €3.50/kg MS, which is effectively between 24.5 and 25c/l.

The July milk league table reflects the fourth round of summer milk price cuts as a result of the global supply and demand imbalance. The west Cork Co-ops, which trade globally as Carbery, remain toward the top of the league.

The small north Cork co-op Boherbue actually tops the July league but it has a very small pool (less than 0.5% of national pool) and also it is not part of the Industry KPMG/Irish Farmers Journal annual milk price review. Uniquely, the majority of its milk is sold to a chocolate-making factory in Kerry.

Milk price decisions taken by boards of management show July milk prices have dropped on average by over 1c/l compared to June milk prices. This effectively takes the average base milk price for Irish dairy farmers under 25c/l when you exclude VAT and transport costs. Last week, we published Northern Irish prices and on average the majority were under 19p/l (25.7c/l)

Most processors except Carbery in west Cork decided to cut prices in July. All processors are supporting milk prices to some extent, some more than others.

Kerry milk prices have been in the lower divisions of the Irish Farmers Journal monthly milk leagues all year and while it held May price for June, it announced the most severe July cut of 2c/l for July milk deliveries.

Big players

Other big players, Dairygold and Arrabawn, cut by 1.5c/l for July. Aurivo, Glanbia, Tipperary Co-op and Lakeland Dairies cut July base price by 1c/l. Dairygold has held onto its position at the bottom of the monthly league for July, something which won’t go down well with suppliers. It is fair to say that there isn’t much between them at the bottom.

Centenary Thurles, which is paying a 1c/l bonus for June and July to those suppliers (95%) that have signed a milk supply agreement (MSA). Centenary Thurles has a local fresh milk bottling plant but sells most of its milk pool to Glanbia or Tipperary Co-op.

August milk prices

August milk prices are not known yet, but many are suggesting given the positive news on global markets again this week that no further cuts are necessary. This week the Global Dairy Trade (GDT) Auction posted a 10.8% increase, which follows on from the 14.8% increase in the auction two weeks ago.

Figure 1 shows the difference in payout between processors depending on payment for milk solids if all processors were processing milk at 3.43% protein and 3.99% fat.

It shows the difference in the milk cheque for a supplier with a normal seasonal spring supply curve (12% in July) for a farm that will produce 300,000 litres (66,000 gallons) in the year.

Difference

You can see this month there is over €1,000 of a difference in the July milk cheque between the processor paying top price for July and Dairygold, which is paying the lowest price.

Figure 2 shows the difference in payout between processors using the average percentage milk solids that processors collected from their suppliers in July. There are no conditional bonuses included in this graph. If your milk qualifies for a conditional bonus from your processor, the price you receive will be higher than shown on the graph.

The upward march continues with strength across the board in all the major categories of dairy product. Whole milk powder (WMP) was up 12.1%, Skim milk powder (SMP) was up 11.7%, with butter up 8.1% and cheese up 4.7%.

Interestingly, the NZX WMP futures continue to price at a premium to the GDT, which suggests the current improvement is expected to be ongoing in the coming trading events. Once again the improvement was very uniform across the various contract periods that could suggest that we have yet to see a wholesale return from Chinese buyers looking to take advantage of the reduced tariff period for New Zealand product which commences 1 January.

While two significant bounces will bring some respite to the falls (as Figure 4 illustrates) there is still plenty of upside available.

Yes, there are reduced volumes being offered, but the upswing is bringing some relief on prices. Early season milk supply figures show New Zealand production is up on last year at 11% for July (very small volumes just yet), with the August supply figure not available yet.

The weather in New Zealand can vary a lot from region to region and there has been a lot of rain in parts but there is an El Niño weather pattern forecast. This is suggesting cooler temperatures with more wind from the southwest, but likely to be much drier in the north and east.

Heavy rain from now on is unlikely and July and August were drier than normal across the Waikato with more frosts than normal for the last few years.