"The month's milk auction delivered fantastic news for farmers with the average price increasing by over 4 pence per litre to 28.29 pence," explained United's Group Chief Executive David Dobbin.
"However, no sooner had the auction finished than we learned that the EU Dairy Management Committee had agreed major cuts in export refunds for milk powder and butter."
He added:"This auction was for November milk which is the lowest supply month in the year. With these export refund cuts, milk prices have probably now hit their peak for 2009. The market is finely balanced and, with supplies from New Zealand and other Southern Hemisphere countries now starting to ramp up as they enter their Spring, it is critical that the EU does not over-react to the rising market and send the industry on a downward spiral again.
"The EU Commission has reduced the export refunds on skimmed milk powder to zero and halved the refunds on wholemilk powder and butter. For wholemilk powder the reductions are equivalent to 2 pence per litre of milk, and for milk used to produce butter and skimmed milk powder the reductions are equivalent to almost 3 pence per litre.
"For months we have been warning that the EU Commission should tread carefully to avoid damaging the recovery in dairy markets. These cuts will stop or substantially reduce export activity and this will increase the supply of product within the EU market. The impact of this will be to push down returns and milk prices within the EU just when they are recovering."
He concluded:"We have to avoid boom and bust cycles that are detrimental to the entire dairy supply chain - milk producers, processors and their customers. This can be best achieved through managing supply and avoiding overproduction. The EU needs to review its policy of phasing out quotas rather than pursuing short term, start/stop quick fixes."
In this month's auction 35 million litres of milk were sold at an average price of 28.29 pence per litre, compared to an average price of 23.90 pence per litre at last month's auction.
The October milk auction result aligns with the UFU's earlier predictions which followed consecutive, positive results from the Fonterra auction in New Zealand over the last three months.
"This is a direct reflection on improvements in many global markets along with local circumstances such as the impact of the €/£ exchange rate which have boosted the Northern Ireland market," stressed the Union Dairy Committee Chairman William Cromie , who added:"This is the highest September to October price increase since the auction began. If you consider that back in December 2008, we had an auction price of 16.63 pence per litre, today's result is a 11.66 pence per litre improvement that should allow dairy farmers to at last start seeing some profitable return for their efforts. Most importantly, it will help them to start paying off many outstanding bills. It should also better prepare our members for the more expensive winter months."
However, the UFU is also stressing that producers should err on the side of caution as the increase will be partly influenced by the drop in Northern Ireland milk production and milk deliveries falling year-on year by 7%. This drop in milk produced is a harsh reality of the torrid 12 months faced by milk producers, with many farmers calling it a day from the industry as they were unable to make ends meet.
Farmers for Action spokesman William Taylor has also welcomed the price rise recorded at the United auction but went on to question the policies of other milk buyers in the province.
"Why have they not been able to increase their producer prices in line with what we now know is a strengthening market for dairy products?" he continued.
"I would also urge local dairy farmers not to rapidly expand their milk output until we know that international milk markets have been placed on a sustainable footing. The last thing the province's milk industry needs is another cycle of boom and bust."