United Dairy Farmers' latest milk auction, held on Thursday, produced an average price of 24.28 pence per litre. This was 1.6 pence up on last month's auction and 1.25 pence ahead of the prices paid at the corresponding event in 2007.
United Group chief executive, David Dobbin, told Farming Life that, as expected, prices at the auction had moved up.
"We have now sold all of United's peak milk and have started to sell late summer milk. Market returns have also stabilised, helped by the late season drought which has hit New Zealand and the stronger Euro. If the current market con-
ditions continue we would expect further improvement at the next auction," he added.
"Dairy farmers are under huge cost pressure with escalating fertilizer, fuel and feed costs and desperately need to see an improvement in their milk price. Hopefully, we are now at the bottom of this year's pricing cycle and United's base price for April at 21.5 pence is five pence above last year.
"United members will see improvements in price from June onwards but prices will not climb as far or as fast as last year. We cannot accurately forecast beyond August when New Zealand normally re-enters the market and starts to pre sell their spring output."
Mr Dobbin added: "As this week's auction was for part of our deliveries for June, July and August, United members will not see the benefit of this auction until they receive their milk cheque for June supply.
"United's auction prices normally reflect the seasonality of the Northern Ireland milk supply with prices moving up in the late summer and autumn. While we can not guarantee what will happen, we are cautiously optimistic that the weakness in sterling and the expected tightness in the GB supply situation should provide opportunities for the Northern Ireland industry and help support higher auction prices as we move through into the summer. While prices should climb they are extremely unlikely to go as high as last year.
"After a cold and sluggish start to the 2008 growing season, this month's favourable weather has led to a surge in milk supplies across the UK and Ireland. In recent weeks some companies have struggled to handle all of their milk. In GB, reduced processing capacity has meant that Westbury, the major balancing plant, has been generally full in May. As a result the spot milk price in GB has fallen to the return level of skim powder/butter, the same levels as in Northern Ireland. Spot GB prices should strengthen as we move away from the peak."
In the auction a total of 44 million litres of milk were sold. Of this, 42 million litres were sold on three-month contracts for delivery in June, July and August at an average price of 24.28 pence per litre. The other two million litres were sold on one-month contracts for delivery in June, also at an average price of 24.28 pence. The overall auction average was 24.28 pence per litre, compared to an average of 22.65 pence in last month's auction and 23.03 pence in the auction in May last year.
William Cromie said the results of the latest milk auction were a blow to local milk producers, struggling to cope with soaring feed, fuel and fertiliser production costs.
The average price recorded was just over a penny ahead of prices in May 2007, but the UFU said that dairy farmers' production costs had risen by approximately five pence per litre during the same period.
In a message directed at milk processors in Northern Ireland, William Cromie said dairy farmers should not be taken for granted and if profitable farmgate prices did not emerge then producers would consider their future in the sector.
He added: "Milk processors should not underestimate the strength of feeling among producers about current farmgate prices. Dairy farmers costs have rocketed and they are facing major investment decisions to comply with the Nitrates Directive. Producers need confidence to invest in their businesses but instead there is a general feeling that the industry is less well off now than it was 12 months ago. Milk auction prices may be a penny better than a year ago, but our production costs have gone up by approximately five times that amount. These economics simply don't add up to profitable dairy farming.
"The UK Actual Milk Price Equivalent in April is 24.9 pence per litre and that should at least be the farmgate figure paid to local farmers. Consumer prices for dairy products are high, the cheese market is still strong and the Euro/Sterling exchange rate is very much in our favour. Milk processors need to convert these positive factors into better prices for dairy farmers who have to offset their rising costs.''
Farmers for Action (FFA) Northern Ireland co-ordinator, William Taylor, told Farming Life that all dairy farmers must target their low milk price anger directly to their milk buyer.
"We currently have a situation where United Dairy Farmers is taking all the flak because of a difference between their recent milk cheque base-price, dictated by previous auctions, as opposed to the top-payer. This is creating a differential of approximately 2.5 pence per litre," he added.
"However, this diverts from the main issue which is that the top milk buyer is still only paying out around 24 pence per litre. This is still 30 per cent below the cost of production when compared to the European Milk Board costs of production figure of 34.8p/l.
"This weeks' United Dairy Farmers auction realised an average price of 24.3p/l and perhaps points towards a market improvement worldwide. Nevertheless if dairy farmers are going to stay in business then they should relentlessly pile the pressure onto their milk buyer, instead of being satisfied they are better off than their neighbours who supply a different processor."
He said: "It's time for all dairy farmers to wake up and smell the coffee. When all of 2008's input costs come home to roost reality is going to set in with a vengeance. Unless dairy farmers move now to make it clear that all current processor farm gate prices are totally unacceptable, at 30 per cent under the cost of production, processors will assume they are paying enough!"
Last week was also marked by a meeting involving representatives from FFA and the Dairy Council for Northern Ireland. The FFA grouping comprised William Taylor and steering committee members, Sean McAuley, Samuel Morrison and Lyle Mackey. In attendance for the Dairy Council were chief executive, Dr Mike Johnston, chairman, David Ross, and vice-chairman, William Hanna.
Speaking afterwards, William Taylor said that with milk being such a natural drink Dairy Council should have a head start against the man-made beverages.
"So, where is the problem and why are we not selling more liquid milk or milkshakes in rugby clubs, football clubs, pubs, hotels and at all our tourist attractions? The Dairy Council could be doing more in this area but then couldn't we all," he added.
"To be fair to Mike Johnston, he claims he doesn't have the budget of Coca Cola - but would need it in order to achieve the same amount of PR."
FFA is now recommending the following steps as ways by which farmers across Northern Ireland can help the work of the Daiy Council.
"If out in a restaurant, café or airport - have a glass of milk or milkshake instead of coke, sprite or even alcohol. This will encourage others,'' said Mr Taylor. "Buy specifically NI dairy produce where available as a first choice.''
FFA has also concluded that Government could save millions by being a lot more generous to the Dairy Council. This is on the basis that encouraging young people to drink milk will lead to drastically reduced health bills down the line. FFA also discussed the possibility of a franchise idea, which would raise extra revenue for the Dairy Council.
o Dairy farmers' anger, Page 25