Co-ops Must Plan Beyond the Easy Target of Milk Prices
IFA National Dairy Chairman Tom Phelan said co-ops should carry out a root and branch examination of all costs of doing business. It is unacceptable that farmers are taking the full brunt of the COVID crisis.
Co-ops must recognise they have overdone the price cut in March. As EU dairy prices stabilise above intervention levels, co-ops must look at all opportunities to reduce costs.
“Energy costs are well down and will reduce the cost of collecting and processing milk for many months ahead. Motor diesel prices are down 14% year-on-year, crude oil quotes have plummeted 75% since early January, while Dutch natural gas quotes have fallen 48% in the last year. Futures markets quotes for all those suggest continued low oil and gas prices well into 2021,” Mr Phelan said.
“Co-ops cut the March milk price by too much, too soon despite the fact they had sold product forward. The worst-case scenario which co-ops used to justify up to 2c/l March milk price has simply not materialised, as dairy prices have remained above intervention,” he said.
“Global dairy trade is slowly restarting as China comes out of lockdown: Chinese March 2020 dairy imports increased by 10% in total, while EU sales rose by over 20% in volume compared to March 2019,” he said.
“As we write, EU average SMP prices are €242, and butter prices €703/t, and EU spot prices €220 and €410 above their respective intervention buying-in levels. The introduction of the EU APS scheme, after much lobbying by IFA and other industry interests, clearly reassured operators and helped prices to stabilise,” he added.
“Farmers will have to look at all of our costs to protect their businesses from COVID 19. Co-ops must do the same,” he concluded.