I FA D A I R Y A N D L I Q U I D
MILK NEWSLETTER
Issue 9
Volume 7
O c t ob e r
2016
SCOPE FOR AT LEAST 2C/L PRICE INCREASE FOR SEPTEMBER MILK
Even allowing for the slight 3% cooling off in GDT on 3rd October,
continued increases in EU and global commodity price trends, underpinned by rising cow culls (graph top right) and falling milk production
in all regions bar the US, fully justifiy further milk price increases for
September and the coming months. Further proof of this is the 6.4
point increase in the September Ornua PPI to 92.2 points, equivalent
according to Ornua to a farm gate milk price of 26.6c/l incl VAT.
There is real scope for at least 2c/l of a price increase on September milk, and co-op board members, who will be meeting early this month to decide on
this issue, must ensure the rapidly improving dairy market returns are passed back fully
in real time to support farmers through the continuing cash flow crisis.
EU milk supplies (graph right) have dipped below last year’s level for June (-1.6%) and July (-1.4%) and the EU reduction scheme will
sustain that trend into the back end. Within individual countries such as the UK (-8.3% in July, estim. –7.9% for Sept), France (-2% for
April to Sept), Germany (-4.5% w/b 19th Sept) and Poland (-1.2% for August), that falling trend has been visible for several months
now. Even in Ireland and the Netherlands, where production has continued to increase,
the growth levels are considerably slower, with 1.8% and 4.9% respectively for August
output from those two countries, with Friesland Campina incentivising further reductions due to phosphorous limitations. In New Zealand, output is down 3% for that
month, while Australian July supplies are back over 10%. In South America, bad weather and the vagaries of the economy have also depressed production, by 10.5% in Brazil
and by 18% in Argentina. Milk production in China also appears to struggle, with low
prices and competition from imports leading to an 11.9% shrinkage in the national herd
in the 12 months to March 2016.
This reflects poor profitability in most countries, with very strong increases in the number of cows culled: in the EU, this was up 7.8% for the first half of the year, and 9.5%
for June alone (see graph right).
Together with good demand, including a 27.4% volume increase in
DON’T MISS THE LAST IFA REGIONAL
Chinese imports for Jan-Aug, and improvements in South AmeriDAIRY FARM INCOMES MEETING IN MUNSTER
can (+5%) and Asian (+7%) imports, this has driven a continued IFA, Co-ops and Government/Opposition politicians and
recovery in dairy prices right through September and into October. spokespeople address what remains a difficult cash flow situation
EU dairy market prices on 25/09 (table below), as reported by the on most dairy farms despite the turn-around in milk prices. The
EU Milk Market Observatory, were equivalent to a gross return
first two meetings in Kilkenny and Carrick on Shannon took place
10c/l higher than in early May, at 35c/l for an Irish product mix.
last month, and the third on 3rd October in Cavan.
After deduction of processing costs, this is equivalent to a farm
The last one starts at 8 pm on Monday 10th October at the
milk price of 30 to 31c/l.
Firgrove Hotel, Mitchelstown, Co. Cork
Naturally, co-ops have engaged in forward selling at lower prices
See detailed programme at bit.ly/2c3m3TH
earlier in the year, as was commercially sensible in times of falling
prices. But these contracts are progressively coming to an end, and
IFA LIQUID MILK RALLY
new contracts will reflect prices closer to those higher levels.
Tuesday 25th October, 8 pm
See a more comprehensive market report in our latest IFA
Dairy Market Blog at bit.ly/2dR4Fol.
Heritage Hotel, Portlaoise (town centre)
FRESH MILK CAN’T BE TAKEN FOR GRANTED!
The end of milk quotas poses new challenges to specialised liquid
milk producers: will dairies and retailers remunerate them sufficiently for them to stay committed to liquid milk production,
when winter payments are insufficient to cover costs, and when
expansion options are for spring milk production only?
What 2016 winter prices do they need, and what will dairies pay?
The Rally will feature the experience of a farmer who has switched
from liquid to spring milk, the importance of the NDC mark and
local milk to the economy, and will hear what winter price is needed for liquid milk producers to break even. Don’t miss it!
Full details will be on www.ifa.ie in coming days.
FARMERS STILL UNDER CASH FLOW STRESS
AFTER 27 MONTH MILK PRICE SLUMP
EU PRODUCTION REDUCTION SCHEME:
SECOND ROUND DEADLINE 10TH OCTOBER
Milk prices have been increasing in July and August, by up to 2.5c/l.
August milk prices are around 23.7c/l +VAT for the main purchasers. While the improvements are welcome, and the prospect for further uplifts very positive, the reality is that farmers are still producing
milk for prices that do not cover production costs, and as this has
lasted for several months, cash flow for many is at breaking point.
At the IFA Dairy Farm Income meetings, Catherine Lascurettes
showed that, while 2015 incomes were saved by high volumes
(+13.3%) and good production conditions keeping feeding costs
down, farmers did not make sufficient margins to pay themselves
even a modest wage equivalent to 6c/l (the footnoted farmer’s own
labour figure in the Teagasc eProfit Monitor)at any point that year.
2016 was considerably worse again, as prices fell very rapidly at the
beginning of the year to levels well below even bare production costs.
It is critical that industry would pass back every cent now that dairy
markets are allowing for higher milk prices. There is a long way to go
before farmers return to positive margins!
The first phase of the EU production reduction scheme was
almost fully subscribed, with 98.9% of the possible reduction
applied for by 52,101 farmers - of which 4,447 in Ireland.
The total quantities applied for were 1.06m tonnes, leaving a very
small 11,407 t available for a second round (see details below).
The average application per farmer across the EU was 20 tonnes
(19,400 litres), with Irish applicants averaging 17 tonnes (16,500
litres). Assuming farmers deliver exactly the reductions promised, this means EU applicants should receive an average payment of €2,800, and Irish applicants €2,380.
Second round now open for the Nov 16 to Jan 17 period
The unspent fund due to the 1.1% under subscription in the first
round amounts to just under €1.6m.
This is now open for EU wide applications, first-come, first
serve, but only for those who have not applied for the first
round. Allocations are likely to be very small.
The terms and conditions are exactly the same as those under the
first round (see here for conditions and guidelines
bit.ly/2dv8Nao).
Applications forms can be obtained from your co-op, and must
be filled and returned to them by Monday 10th October. The
overall EU deadline is Wednesday 12th October 12.00 noon
Brussels time, so it is crucial that applicants would not to miss
the 10th October deadline.
BUDGET 2017—GOVERNMENT MUST
DELIVER ON EU AIDS AND TAXATION
IFA has lobbied hard this year to obtain two main elements from
government relating to Budget 2017 for dairy farmers.
First, we need the available EU aid packages to be optimised to
allow farmers access to flexible, low cost finance to deal with
short term challenges to cash flow caused by accumulated merIFA PRESIDENT MEETING DAIRY INDUSTRY chant credit, superlevy, utility, tax and other bills. The government can and must match Ireland’s €11.1m share, and use it to
IFA President Joe Healy and the Dairy Team are meeting with all cosupport dairy and other livestock farmers through the income
ops and Ornua, to discuss the market outlook and emphasise the need crisis. Last March, the EU gave member states concessions to
for industry to support farmers through maximum milk price increases, use state aid up to €15,000 per farm to help bridge farm cash
flexibility on merchant credit and other practical supports. For the
flow gaps through loans or guarantees. Minister Creed must
longer term, IFA is also stressing the need for a greater choice of risk
deliver this urgently as bills are piling up on farms.
management tools such as
The second, longer term priority is the introduction of amendfixed milk price contracts or
ments to the 5-year income averaging scheme to allow farmers
other forms of hedging. Most
pay tax on current year income when this is low in up to 2 of the
recently, IFA met with Ornua
5 years, and defer the full tax payment due for two years thereaf(right), who have a crucial role
ter. This must be delivered to secure the sustainability of the
to play in this area.
sector.
CellCheck Tip of the Month: Mastitis Control Makes Cents!
Every extra cent counts when producing milk in a time of low prices. Reducing the incidence of mastitis on your herd, both clinical cases and high somatic cell count (SCC) is a guaranteed way to reduce
costs and increase profit.
The CostCheck interactive calculator has been developed, using robust economic research from
Teagasc, to help you calculate the impact on profit of a lower herd SCC. You use your own farm data, as well as current milk price, cull
cow price, treatment costs etc. to estimate the impact mastitis is currently having on your farm profit. You can then set a target reduction
in the incidence of mastitis, and clearly see the additional profit to be gained .
For example, even at a milk price of 22 c/l and without a bonus for low SCC, a 100 cow herd
with an annual average SCC of 150,000 cells/ml is generating an extra €7,087 in profit, compared
to having an average SCC of 250,000 cells/ml. In this example, the extra profit comes from the
areas outlined in the pie chart on the right.
When calculating the true cost of mastitis, it is easy to quantify the obvious costs but the hidden
ones have to be considered too. Use the CostCheck calculator to see how much extra profit
could be made on your farm. This tool can be downloaded from the Animal Health Ireland website (www.animalhealthireland.ie) or the Teagasc website (www.teagasc.ie)
Compiled by: Catherine Lascurettes, Executive Secretary, National Dairy and Liquid Milk Committees
Contact: Address: IFA, Farm Centre, Bluebell, Dublin 12; Telephone: 01-4500266; email: [email protected]