Irish profit from milk-powder boom

By Philip Clarke

HIGHER international prices for skimmed milk powder are being passed back to Irish dairy farmers in the form of bigger milk cheques, with the promise of more to come in the months ahead.

Most co-ops have increased their payments for May supplies by 1-1.5p/gal (0.2-0.3ppl), and similar rises are expected for June and July, according to Joe Rea, who compiles the milk league table for the Irish Farmers Journal.

Top price, being paid by Midwest Co-op, stands at 107.6p/gal (18.7ppl).

The swift response to booming SMP markets has been in stark contrast to the UK, where the average May price has now slumped to just 14ppl, after tough seasonality penalties.

And with many buyers still chipping away at their Milk Marque plus margins, prospects of any increases before October look slim.

The reasons for the faster payback in Ireland are twofold, says Mr Rea.

First, we have a strong co-operative structure. Second we have a very active farm lobby. UK representatives are not nearly aggressive enough.

Intensive pressure by the Irish Farmers Association was part of the reason Golden Vale this week announced a 4p/gal (0.7ppl) increase for July milk, taking average ex-farm prices to Ir1.04/gal (18ppl).

Previously it had failed to pass back any of the better market returns.

The move, confirmed on the eve of Golden Vales agm, also followed this weeks announcement of a 100/t rise in the SMP price paid to processors by the Irish Dairy Board, worth an extra 3.8p/gal.

Since last October, the IDB has increased their price by a total of 8.5p/gal, said IFA milk chairman, Padraig Walshe.

Some of that had to be retained by co-ops to widen very tight 1999 processing margins.

But he believed the most recent rises (worth 5.4p/gal since early May), should be returned to producers in full.

The rise in SMP values has certainly been dramatic. International prices have climbed steadily from about $1100/t last September to over $1800/t, with some traders predicting $2000/t before long.

Following three years of poor returns the trade has turned around completely, said an Irish Dairy Board spokesman.

The Asian market is back, the Central and South American markets are back and, with the oil price increases we have seen, the Middle Eastern markets are back.

Shortage of production in the EU means the commission has had to revert to emptying intervention stores, with stockpiles down from 275,000t last autumn to 80,000t now.

This bullish scenario is expected to continue until the end of the year when New Zealand and Australia hit peak output.