FOLLOWING five months of increasing prices, this month’s United Dairy Farmers milk auction eased back to average 30.28ppl.
“With more milk available for sale and milk trading into GB now winding down, it was expected that the auction prices would not match last month’s exceptional level,” United Group Chief Executive David Dobbin told Farming Life.
“At a time of high input costs for farmers, any reduction in the auction price is unwelcome, but this month’s average price of 30.28 pence was the highest November auction we have ever had. The average price was 1.2 pence ahead of November last year, even though butter and wholemilk powder returns from international markets are well down on last year’s levels.
“Milk supplies are now starting to climb and we sold almost 20% more milk in this month’s auction - 39 million litres for December delivery, compared to 33 million last month. Milk supplies in GB are also starting to rise and the demand for raw milk to be shipped across the Irish Sea, which helped support last month’s auction, is winding down.
“Although the auction price has reduced, it remains above the returns available from international dairy markets and also above the general run of prices being paid in both GB and the Republic of Ireland.”
Mr Dobbin concluded: “It is also encouraging that the reduced milk supplies in the US and many EU countries is resulting in a better balance on global dairy markets. International markets have been relatively flat in recent weeks, with little product being traded as buyers hold back on purchases for 2013, uncertain about market direction, With New Zealand now moving beyond its peak seasonal output, we are hopeful that markets and auction prices will remain relatively firm over the next few months.”
Not unexpectedly, Ulster Farmers’ Union Dairy Policy Committee Chairman Andrew Addison has expressed his disappointment with the unexpected fall in prices recorded at the November auction.
“There is no justification for the 2.18 pence per litre drop in prices as demand remains strong,” he said.
“In addition milk supplies are continuing to fall, with local milk production falling back 6% in October and with only 39 million litres traded this month. That’s four million litres less than this time last year,” he further explained.
“The UFU has made continued calls for increased transparency in the auction system and we would like to know why the price has dropped so sharply when market conditions are indicating stability.”
Mr Addison added: “This fall in price will be a kick in the teeth to Northern Ireland dairy farmers, whose margins are currently under severe pressure. Last month’s United Dairy Milk Auction results gave dairy farmers a glimmer of hope that after the drastic year experienced, we would end this year with more optimism. However, it seems to be one step forward and two steps back. There is no question our sector is subject to continued price volatility but a decent milk price needs to be sustained so that farmers can make a profitable return.”
Farmers for Action’s William Taylor described the outcome of this week’s milk auction as ‘a disaster’ for the local dairy farming sector.
“In my opinion, prices have risen this month, particularly given the strength of the GB spot market for milk at the present time. Local producers need at least 40 pence per litre for their milk, simply to break even,” he said.
“United Dairy Farmers must go back to first principles and review the fundamental workings of the auction. I see no reason, for example, why the pool of buyers allowed to take part in the auction cannot be expanded. This would provide more competition for the milk that is available.”
Ulster Unionist MEP, Jim Nicholson described the latest auction as ‘disheartening’.
“The drop in price from 32.46ppl to 30.28ppl at the latest milk auction is disheartening for dairy farmers especially following last month’s increase and given the continued cost pressures they face.
“Volatility in the market makes it difficult for producers however increased cooperation and greater transparency are key parts of ensuring long term sustainability and profitability through the entire supply chain.”