The IFA National Liquid Milk Committee met this week in the run up to negotiations between dairies and producer groups for the crucial winter liquid milk prices.
Chairman John Finn said further examination of 2016 milk prices has shown that the relative position of liquid milk producers disimproved over the summer as creamery milk prices fell.
A review today by IFA of the summer calculation, which revealed that producers would need a winter price of 55c/l to reach the 40c/l breakeven, has shown that even with likely further creamery milk price increases, this figure would need to increase even more. This and the attractions of the EU production reduction scheme for milk surplus to contracts must be taken on board by dairies, and they must come forward with meaningful increases in the 2016/17 winter milk price negotiations.
“Earlier this summer, we had calculated that, to reach the 40c/l annual average price which both Teagasc and FDC Accountants have identified as what is needed for liquid milk producers to cover costs and pay themselves a modest wage, farmers would need to be paid 55c/l over the winter months. Updating these calculations to reflect the fall in creamery prices since, the increase in most co-ops in July and even anticipating increases of 3c/l between August and October, we have shown that it would now take 56 to 58 c/l over the 4 to 6 winter months operated by different dairies,” he said.
“Liquid milk producers are facing the most expensive time of year to produce milk, and like all other dairy farmers they have already made significant losses over the summer as milk prices remain well below production costs,” he said.
“Last year, with the end of quotas, insufficient margins encouraged farmers to calve fewer cows in autumn (-16% fewer dairy calves) when overall dairy calvings for the year were up 8.5%. This year, farmers will want to consider their options to avail of the EU milk production reduction scheme for the milk they have been supplying over and above their liquid milk contracts over the winter months,” he said.
“Dairies must enter into negotiation with a clear realisation that significant increases in winter payments are needed to secure supplies: despite what some may have thought, we now know for certain that the end of quotas is not making winter milk production any more plentiful, nor is it making it any cheaper,” John Finn concluded.