Fighting Price Volatility

This week's Fonterra Global Dairy Trade auction showed a fall of 0.9 per cent across all products.

This was the first fall in international milk prices for at least two months.

However, whole milk powder, the main product traded, saw an increase of 2.8 per cent.

Farmgate milk prices

At the end of September, Fonterra announced a drop in their farmgate milk price for the 2012/13 season. Chairman Sir Henry van der Heyden said that an oversupply of milk had contributed to the lower price.

The results of the latest Global Dairy Trade auction have led Irish producers to push retailers and processors for a milk price lift, to make up the gap, which has developed.

"The extreme cost/price squeeze compounded by the appalling summer weather, which dairy farmers have faced this year, means that they need more than anything the most rapid possible increase in milk price to return anywhere near profitability," Irish Farmers' Association National Dairy Committee Chairman Kevin Kiersey said.

The UK's voluntary code of practice between processors and producers was given the go-ahead this week. The code hopes to ensure fairer contracts for dairy farmers.

The code includes 30 days notice of change to prices or other contractual terms, encouragement of producer groups, support or options to increase production.

Protecting producers

In the EU, the "Milk Package" became fully applicable this week. The package provides for written contracts between milk producers and processors and for the possibility to negotiate contract terms collectively via producer organisations. It also sets out new specific EU rules for inter-branch organisations, allowing actors in the dairy supply chain to dialogue and carry out certain activities.

It is hoped these measures will boost the position of dairy farmers in the supply chain.

US dairy producers lost a safety net last Sunday as the 2008 Farm Bill expired without a new Farm Bill being passed.

The Milk Income Loss Contract (MILC) programme compensated dairy producers when domestic milk prices fell below a specified level.

As Congress will not return until mid-November, because of the elections, many industry organisations are pushing for Congress to pass the new Farm Bill in the lame-duck session prior final adjournment in December.