17 May 2002

Milk price dips to lowest level in EU

By Shelley Wright

FARMGATE milk prices in Northern Ireland have slumped to the lowest level in the EU.

And the prospect of the summer peak in production is set to compound the problems.

Figures from United Dairy Farmers, the co-operative buying milk from about 60% of the 5100 producers in Northern Ireland, show that producer prices for March dipped to 16p/litre – a drop of more than 4p/litre since the autumn.

Northern Ireland is more sensitive to currency fluctuations and international market prices than mainland Britain, mainly because it is much more export orientated, says Uel Agnew, secretary of United Dairy Farmers. "Only about 12% of our production is sold to the domestic liquid milk market, compared with about 50% in Britain," he says.

A small amount of milk goes to cheese factories or to food processors, but most ends up as milk powder to be traded on a depressed international market.

Producers face an uncertain summer. Peak production means that prices for April, May and June are likely to fall further.

If evidence were needed, figures for United Dairy Farmers April milk auction showed that 33m litres was sold on three-month contracts at just 15.05p/litre, while 11m litres was sold on a one-month contract at 13.84p/litre.

There is little on the horizon to suggest that international markets will firm later in the year, admits Mr Agnew. "But producer prices should recover a little as soon as production eases again."

Some industry commentators suggest that Northern Irelands dairy farmers have only themselves to blame for the price problems, having increased production year on year without finding an alternative market to bulk powder.

In the five years to 2000/01, 220m litres of milk quota transferred from Britain to Northern Ireland. And the Ulster Farmers Union is concerned that, with the milk price well below the 18p/litre cost of production average, many who borrowed heavily to invest in quota could have difficulty servicing their debt through the summer. &#42