Co-ops Should Focus on Cost Structure when Looking at April Milk Price

Speaking after a meeting of the National Dairy Management Committee of IFA, President Tim Cullinan said all co-ops need to re-evaluate their profit margins and expectations, just as their farmer suppliers are having to do, in response to the very real challenges caused for dairy markets by COVID19.

“Co-ops rushed to slash the March milk price, even though up to 30% of spring milk would have been sold forward at much higher than current prices.  It was clear that dairy farmers would not accept further cuts while co-ops had major scope to reduce their costs,” he said.

 

“Oil and gas prices have plummeted to historical lows, which will reduce the cost of milk assembly and processing for all co-ops.  Also, in light of the exceptional circumstances, banks have engaged with all their customers, households and businesses alike. Co-ops must use this opportunity to also seek greater leeway on their commitments,” Mr Cullinan said.

 

IFA National Dairy Chairman Tom Phelan added: “Co-ops all have different ways in which they decide the price paid to suppliers, and farmers will not be distracted by the details.  All co-ops must look deep into their cost structures to hold milk prices for April”.

 

“Some co-ops, which have lagged behind on milk prices all through 2019 and into 2020, while others have consistently delivered the top prices, have more work to do to deliver for their suppliers,” Mr Phelan said.

 

“We are starting to see some green shoots on markets: most of Asia is out of lockdown and dairy imports are starting to flow again, with a 20% increase in EU exports to China for March alone.  The introduction of the EU Private Storage scheme, as limited as it is, has helped improve market confidence and stabilise spot dairy commodity prices.  Many European countries are coming out of lockdown and restarting food services in coming weeks and months, progressively restoring the outlet which was cut off abruptly some weeks ago,” he added.

 

“The message from the IFA National Dairy Committee and the dairy farmers they represent is clear: co-ops must now focus on digging deeper into their own cost structures to support their suppliers,” he concluded.