IFA National Dairy Committee Chairman Kevin Kiersey has said that the decision by the Glanbia board to increase their January milk price by 1.44c/l + VAT to 29.94c/l + VAT was a welcome first step in passing back the rising market buoyancy back to their suppliers.
Mr Kiersey commented, “We in IFA had clearly identified the scope in January commodity returns for an increase of 1.5c/l. We had also emphasised the need for a price lift in the face of massive feed, fertiliser and fuel cost increases.”
Mr Kiersey said an analysis by IFA had forecast that feed, fertiliser and fuel price increases could lift overall milk production costs by 14% in 2011 when compared with 2010 costs.
“This means that, just to maintain margins, milk producers will need an average milk price 3c/l higher in 2011 than in 2010.
“We have lobbied board members in all co-ops in recent weeks, to impress upon them that current strong market returns allow for early milk price increases to deliver the necessary margin improvements,” he added.
Mr Kiersey pointed out that the outlook for dairy markets in 2011 is very positive, underpinned by weather and feed-cost related global shortages, and strong demand from China, Russia, Algeria and Korea.
He said continued buoyant prices as signaled all the way to October 2011 by the most recent Fonterra auction, would enable co-ops to increase prices further in the next few months, which would hopefully ensure at the very minimum that dairy farmers do not see reduced margins this year.