Lakeland boss rings milk price alarm bells

There will be a “significant milk price correction” this year, as a result of weakened dairy markets, Lakeland Dairies CEO Colin Kelly has warned.

Butter and skim milk powder markets are now around 40% lower than they were in September of last year, he told Lakeland’s regional committee members this week.

“Unfortunately, this is going to result in a significant milk price correction in the coming months. We are conscious that this will cause a lot of challenges at farm level as input costs look set to remain high for the moment.

“We are endeavouring, as always, to maximise the return to you, but the supply and demand fundamentals are weighing heavily on the market at the moment,” Kelly said.

Kelly’s warning on milk price comes as the Ornua purchase price index (PPI) fell this week. The PPI was down 6% to the equivalent of 46c/l, excluding VAT.

“The decrease in the Ornua PPI is due to recent market correction and resulting weaker returns across all products. Based on current spot pricing, further declines in the Ornua PPI are expected over the coming months,” an Ornua spokesperson said.

Furthermore, this week Kerry Group announced its latest fixed milk price scheme.

It has offered suppliers a locked-in milk price of 34c/l to 35c/l for March to October 2023 supplies at 3.3% protein and 3.6% fat, including VAT.

IFA dairy chair Stephen Arthur has said some of the talk by dairy processors has been overly negative. “Our production costs remain high; therefore, we cannot sustain significant cuts to our milk price this spring,” he ?said. Teagasc figures show that soaring input costs saw the cost of production of a litre of milk rise 33% to 37.8c/l excluding own labour cost in 2022.

The negative outlook comes despite dairy prices at Tuesday’s Global Dairy Trade auction rising on average by 3.2%.

International analysts are not quite as pessimistic on future milk prices, with suggestions of a rebound in price in the second half of the year.