IFA challenge to co-ops on autumn milk price

Dairy

IFA challenge to co-ops on autumn milk price

Lakeland Dairies’ decision to increase their July milk price by 1cpl has been welcomed by IFA president Joe Healy.

He said he expects all co-ops to follow suit, in recognition of the growing recovery in dairy markets.

Meanwhile, IFA launched its autumn milk price increase campaign, challenging the co-ops to start rebuilding confidence by acknowledging the growing recovery in dairy markets and increasing milk prices.

Dairy farmers are under extreme cash flow pressures after the prolonged market downturn and IFA will not tolerate any stalling on milk price increases, said its president Joe Healy.

“This is my strong message to co-ops boards and management ahead of an IFA series of meetings with co-ops over the coming weeks: the co-ops must accept that the dairy market recovery is a reality and start increasing milk prices,” he said.

Healy pointed out that EU commodity prices have increased strongly since May with butter up €590/t or 24%, SMP up 6.2%, WMP up 15.5%, Cheddar up 9.1% and Whey up 28%.

“The fact is that EU returns for the main commodities in the Irish product mix have now improved by almost 5c/l, according to the EU Commission’s Milk Market Observatory, giving a gross return of 29.85c/l before processing costs at the end of July. Assuming 5c/l for processing costs, this would allow for a farm gate price of 24.85c/l plus VAT or 26.1c/l including VAT. The latest GDT auction has confirmed this positive trend with prices up 6.6%”.

The association's dairy chairman Sean O’Leary said, “Dairy farmers will be assessing their options for the autumn very carefully ahead of the September application deadline for the EU 14c/l milk supply reduction scheme, which was announced by Commissioner Hogan at the July Farm Council meeting”.

“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,” said Mr O'Leary.

Meanwhile, IFA National Liquid Milk chairman John Finn has said the recent study by Mintel showing that more than three in five consumers on the island of Ireland believe farmers are not being fairly paid for their milk should encourage retailers and dairies to do what it takes to deliver the 40c/l annualised milk price liquid milk producers need to cover costs and pay themselves a modest wage.

IFA calculations, backed by work by Teagasc and FDC Accountants for IFA and Fresh Milk Producers, has shown that, just to achieve this break-even annualised price in 2016/17, farmers would need winter payments of up to 55cpl, he said.

“Without changes to either last year’s payments and premiums or the base creamery milk price, farmers could end up falling 12c/l below the 40c/l break even. This would leave a farmer with a 200,000 litre contract a whopping €24,000 in the red,” said Mr Finn.

He said that the Mintel study showed a large number of consumers on the island of Ireland would be prepared to pay 10c to 20c more for a two litre pack of milk if this went back to pay farmers more fairly.

“This suggests a level of understanding among consumers of the economic difficulties encountered by milk producers, which IFA has worked hard to convey to retailers and dairies, and which they must now take on board,” Mr Finn said. “Dairies and retailers must now do what it takes to ensure liquid milk producers receive significantly increased premiums and payments over the next winter months to allow them cover their costs.”