Cavan-headquartered co-operative, Lakeland Dairies, has warned that there is likely to be a “significant” correction on milk price in the coming months.

The co-op has highlighted to suppliers that in the past number of months dairy markets have “weakened significantly” with butter and skim milk powder (SMP) currently sitting at around 40% lower than they were in September 2022.

In its latest correspondence it pledged to “maximise the return” to members but it also sounded a cautionary note about market pressures at this time.

The co-op told suppliers that it is very aware that any movement on milk prices will have a major impact on farm families as inflation-driven input costs continue to create significant challenges.

In a statement to Agriland, the Cavan headquartered co-operative said:

“Lakeland Dairies is continuing to monitor market developments and is keeping milk suppliers updated on an ongoing basis.

“The milk price is decided by the board of the co-operative on a monthly basis taking all available information into consideration.”

Earlier this year the co-op had also sounded a note of caution to its members when it confirmed that it had maintained the milk price for December.

It said last month that “markets have weakened very considerably throughout the past quarter”.

“Economic conditions worldwide remain uncertain and consumer spending power is increasingly compromised by inflation and cost-of-living circumstances, with continuing effects on buying patterns,” it warned.

Farmer-owned Lakeland Dairies collects an estimated two billion litres of milk from 3,200 farm families across 16 counties across the island of Ireland.

The co-op produces a range of dairy food ingredients, foodservice and consumer products, which are exported to more than 80 countries worldwide.

The stark warning from Lakeland Dairies to suppliers about a milk price correction on the cards comes against the backdrop of a number of indicators that show a decline in dairy commodity prices in Europe.

Teagasc has also previously highlighted that “an exceptional supply and demand situation in 2022 resulted in extraordinarily high milk prices”.

Milk price

In its recent Economic Outlook for Irish Agriculture report it highlighted that in the context of European milk prices Ireland had recorded some of the highest increases across the European Union.

But Teagasc warned last December that the dairy market in 2023 would most likely experience “an easing of international demand growth and greater global milk availability on the supply side.”

“While dairy commodity prices moved upwards over most of 2022, there were already signs in Quarter 4 of 2022 that prices had moved past their peak,” it stated.

Teagasc noted last December that prices for butter and milk powders had slipped.

It had also indicated that because the “Irish milk price benefitted disproportionately from the buoyant international dairy market in 2022” , it was likely that the Irish milk price would “also feel a disproportionate impact from the fall in international dairy commodity prices in 2023”.

Teagasc has forecast that the annual average Irish milk price in 2023 “will be down 15 percent on the 2022 level”.