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Tight global supplies and strong demand continue to force on international dairy commodity markets, and suggest there is considerable scope for processors to pay higher prices this winter.
The latest fortnightly Milk Price Indicator (MPI) produced by the Ulster Farmers’ Union (UFU) has jumped 2.31p/l to sit at 36.16p/l, its highest since it was first published in 2013.
In European markets, prices recorded at the weekly Dutch Dairy Board auction continue to strengthen with butter up a further €70/t to stand at €5,400.
The price of butter is up 44% since the end of July 2021.
All the commodities are doing very well, especially butter
Whole milk powder went up €50/t to a price of €3,750/t, which is a 22% increase on July prices, while skim is now priced at €3,070/t, a 27% increase from July. In Britain, spot milk prices are reported as being around 42-44p/l.
UFU senior policy officer Chris Osborne points out that the industry is seeing a period of sustained increases in dairy commodity prices.
“All the commodities are doing very well, especially butter (driven by cream prices) and mild cheddar, which this week has reached its highest UK price on record.
“This is significant since these are products that NI processors sell,” he said.
The reality is that given where costs are at, our farmers need every penny and higher returns must be passed back to producers
While the MPI is now over 36p/l, the price index does not include a processor margin. “But even if we allow for a fairly conservative 3p/l to cover this, it still points to base milk prices around 33p/l. The reality is that given where costs are at, our farmers need every penny and higher returns must be passed back to producers,” said Osborne.
It is an argument reinforced by local dairy consultant Jason McMinn. At the start of October 2021 analysis by McMinn and his counterpart Ian Carrick put break-even milk price for a typical dairy farm client at 31p/l. However, costs have moved on since then.
“Our analysis suggests that fertiliser alone is going to add 1.5 – 2p/l to costs. The latest budgets for clients are putting typical costs of production around the 32 – 33p/l mark,” he told the Irish Farmers Journal.
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