May 31, 2011


United Group's milk auction price increases


United milk auction price for this month rose by two thirds of a penny to average just over GBX26.5/litre (US$ 0.43).


"This was an encouraging auction for United members, with the average price moving up compared to the two Fonterra auctions this month which were both slightly down," confirmed David Dobbin, the United Group Chief Executive.


He added, "We are now seeing EU and local milk supplies ease back and this has helped to stabilise international dairy markets. At this week's auction, with less milk for sale and more stable international markets, the price has moved up. The average price of GBX26.52/litre (US$0.43) was GBX0.67 (US$0.01) ahead of last month's average and almost identical to the record May price we received in the equivalent auction last year.


"Local milk supplies peaked around the time of Balmoral Show and, with the downturn in the weather, production is now easing. As a result we sold 52 million litres of milk for June delivery in this month's auction, down from 57 million litres last month.


"Milk supplies in Europe are also weakening, with supplies in some regions, like the South of England and France, now clearly affected by early drought conditions.


"Global markets had fallen in March and April in expectation of the EU spring surge in milk supplies. However, production in both Europe and the US has been lower than anticipated and, with New Zealand largely out of the market, and continuing firm demand from China, Russia and North Africa, the international market has stabilised with prices in some sectors having edged up."


Dobbin concluded, "With the Northern Hemisphere peak milk supply period now behind us, we expect to see further improvement in United's auction prices over the next few months. After that, the trend in market returns will depend on the growth in this autumn's production peak in the southern Hemisphere. In July and August, Fonterra will begin selling forward for their peak autumn production season and will set the pattern for powder prices going into our autumn. Therefore, most will depend on the balance between supply and demand at that time."


In this month's auction, 52 million litres of milk were sold for June delivery at an average price of GBX26.52/litre (US$0.43), compared to an average price of GBX25.85 (US$0.42) for the 57 million litres sold in last month's auction, and GBX26.53 (US$0.43) for the 52 million litres of milk sold in the May auction last year.


The Ulster Farmers' Union has welcomed the stabilisation in milk returns signalled by the prices paid at this week's auction.


UFU Deputy President Ian Marshall said, "We have seen a slight rise of GBX0.67/litre (US$0.01) in the average milk price paid this month.


"I am pleased to see the milk price stabilising, with export demand continuing to rise. This price is reflective of the current situation in global markets, as well as locally. Production levels have been increasing from the beginning of the year, with 21 million litres more milk produced in April 2011 than in the same month in 2010, and now milk production has peaked. I would also like to acknowledge processors for their successful handling of this increased volume.


"This early peak in production and with a lower level of production expected in June means that processors are looking for supplies to boost their economies of scale in their plants, resulting in a stable price for producers."


The UFU will be meeting with United Dairy Farmers next week to introduce the new UFU Deputy President Ian Marshall, Dairy Chairman Andrew Addison and Dairy Vice Chairman Jonathan Moore.


Commenting on the outcome of this week's auction, Farmers for Action's William Taylor, said that he was very impressed by the extensive range of value added products featured by United Dairy Farmers at this year's Balmoral Show.


"But this commitment to investment and innovation must be converted into better farmgate prices. Local milk producers are currently receiving prices that are up to 45% behind the current European Milk Board Cost of production figure," he added.


Taylor concluded, "I am also calling on United Dairy Farmers to re-introduce the previously accepted practice of offering members a 13th payment in the year. This will signal the co-op's intention of supporting its milk suppliers in every way possible at a time when dairy farming incomes are under extreme pressure."

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