The latest Ornua Purchase Price Index (PPI) indicates an almost 3c/L reduction in milk price return for January.

The PPI indicative milk price return for last month is 34.2c/L, down from 37c/L for December.

The index figure has fallen to 121.9 for January, compared to 129.4 for the previous month.

The figure is based on an estimated member co-op processing cost of 9c/L for the first quarter of the year, which is down slightly on the 9.1c/L estimated processing cost for last quarter, which was used to calculate the December index.

The estimated processing costs are based on Ornua’s estimate of the average cost of processing the Ornua basket of products, which is not representative of any individual member co-op processor.

The estimated processing cost also excludes any allowance for member co-op margin.

The estimated cost is determined using Ornua's processing costs for 2020 as a base, and by indexing the variable elements of the cost to external indices which are updated quarterly.

The estimated co-op processing cost therefore will increase or decrease in line with those external indexed costs (mostly energy).

Ornua said that the PPI and indicative price (which is based on milk at 3.6% fat and 3.3% protein) is net of its costs to market, and reflect "weak market returns for the month of January".

Ornua said that the PPI and indicative price are "not directly aligned" with milk production and payment, due to reasons of seasonality.

As well as announcing the PPI, Ornua also said that its value payment for January is €400,000, which equated to 6.3% of gross purchases in the month.

GDT

The continued slide in the Ornua PPI, which has been ongoing for several months, is unwelcome news, but there were more positive developments this week on dairy markets.

The Global Dairy Trade (GDT) index increased by an impressive 6.7% after the latest trading event this week.

The latest index reflected an average price of €3,235 per metric tonne (mt) of product sold.

This is the third consecutive increase in the GDT index, which is updated after every trading event every two weeks.