Milk prices in NI should climb towards 30p/l this spring as global demand for dairy commodities surges ahead of supply.
This demand has fuelled a sustained period of upward price trends for dairy fats and proteins since early autumn of last year.
The strength of this buying demand was most evident at this week’s GDT event where the index price rose by 15%, its largest percentage rise since September 2015. The index now stands at its highest level since March 2014.
Whole milk powder (WMP) and butter were the main winners at the New Zealand-based auction, rising by 21% and 13.7% respectively.
WMP is now at its highest value for seven years. Cheddar and skim milk powder (SMP) also increased in value, but at more modest levels.
It is understood that not all buyers were able to fill orders as demand outstripped supply.
This bodes well for the next GDT auction in two weeks, and, with milk production past peak supply in New Zealand, some market analysts expect commodity markets to rise further.
Tuesday’s GDT auction was the eighth consecutive event to record a price increase and since mid-September, 11 out of 12 auctions have been positive.
This trend has filtered through to European commodity markets, particularly the weekly Dutch Dairy Board (DDB) auction.
At this week’s DDB, butter rose by €120/t to €3,770/t, putting it €400/t ahead of March 2020. It is the eighth week in a row butter has increased in value.
WMP rose by €40/t on the week to €3,000, making it seven price increases since the start of the year. SMP has strengthened by €200/t since the outset of the year.
Expectations are that European dairy commodity markets will continue to strengthen during March.
NI milk price
Given that the majority of milk produced in NI is sold into commodity markets, the trend in global commodity prices is significant for local dairy farmers.
After this week’s GDT and DDB events, the latest milk price indicator (MPI) published by the Ulster Farmers Union has risen by 1.85p/l to 32.05p/l.
It is the third MPI in a row to exceed the 30p/l threshold and it now stands at its highest level since September 2017.
Deducting a 2p/l margin to cover transport and processor margins, the MPI points to a farm gate milk price in the region of 29 to 30p/l during the spring flush in April and May.
When the MPI last went over 32p/l in early autumn 2017, base milk prices averaged 29.8p/l across all processors.