Lakeland price hike marks real sign of recovery in dairy markets

In one of the strongest indications yet of recovery in dairy markets, Cavan-based Lakeland Dairies yesterday increased its monthly milk price for the first time in nearly 18 months.

The co-op, which is usually first to declare its monthly price, hiked its July price by 1 cent to 24 cents.

The move reflects a modest improvement in dairy market returns internationally and tallies with a sequence of positive Global Dairy Trade (GDT) auctions .

Over the past two years Irish dairy farmers have been blitzed by a global downturn in dairy markets, which has seen prices collapse by about 40 per cent.

In an effort to rebalance the market, the European Commission last month re-introduced milk supply control measures for the first time since the lifting of quotas in recognition that oversupply in Europe had become a major factor.

While the 24 cent price marks an improvement, farming industry body Teagasc estimates the average cost of production in Ireland is about 25 cent a litre even before labour costs.

Reacting to Lakeland’s price rise, the Irish Farmers’ Association (IFA) called on other processors to follow suit.

IFA president Joe Healy said the farmers' group would not tolerate any stalling on milk price increases as dairy farmers remain under extreme cash flow pressures after the prolonged market downturn.

The IFA’s dairy boss, Sean O’Leary, said: “It is now quite clear that the tide has turned on dairy markets and that we are looking at a recovery. With the dire cash flow shortage on farms and prices below the cost of production, farmers will need every extra cent from the market returned by co-ops to help pay bills and rebuild badly shaken confidence.”

The downturn in dairy, the worst in nearly a decade, was initially blamed on a combination of falling Chinese demand, the Russian trade embargo and a general glut in global production but, laterally, post-quota production in Europe has been cited as a chief cause.

While Ireland has had one of the largest post-quota increases in milk production, it still only accounts for 4 per cent of production in Europe and its production footprint is relatively small compared to that of Germany or France.

The rise in Lakeland’s price also comes after the Ornua’s monthly indicator of market returns this week rose for the first time in 16 months.