IFA President Eddie Downey and Dairy Committee Chairman Sean O’Leary have this week written to the Chairmen of all dairy co-ops asking them to undertake a root-and-branch review of their business processes to identify savings and progress further cooperation and consolidation to drive efficiencies and help ensure farmers get the best possible milk price.
The IFA President welcomed the announcement that Lakeland Dairies is teaming up with Fane Valley to set up a joint venture.
Eddie Downey said, “In their mid-year outlook, published last week, Teagasc warns that despite increased output and stable input costs, a 28% fall in milk prices means that incomes will fall by over 40%, with up to one-third of dairy farmers finding themselves in negative margins for 2015 as a whole. This is clearly unsustainable going forward, with high demands on cash flow from superlevy and tax liabilities, bank repayments of on-farm expansion, and share purchases or other contributions to co-ops’ development plans. Indeed, these concerns have been voiced very strongly by farmers at IFA meetings around the country”.
“IFA continues to work hard at home and in Brussels to secure a review of the intervention ‘safety net’ level to help put a more realistic floor under markets, and we are demanding that superlevy funds be used to support farmers through this difficult period,” he added.
“We appreciate the support for our campaign from co-ops and industry stakeholders, and the fact that the milk price in many co-ops was supported in the first half of this year,” he said.
“However, it is now crucial that co-op boards and management would make every effort to stop the milk price slide and, as well as investing in additional capacity and developing options to help farmers cope with volatility, they must now refocus on internal efficiencies and necessary consolidation,” he said.
IFA Dairy Chairman Sean O’Leary added: “Reviews and rationalisation should ideally be done in good times, but it is when milk prices are low that the focus is sharpest. Recent cost cutting plans announced by Fonterra and Friesland Campina are clear evidence of this”.
“We are asking co-op chairmen, their boards and management teams to undertake an internal efficiency review of all business processes from milk collection to marketing in order to identify any savings that can be made. We are also asking them to explore all possibilities of consolidation, and not to shy away from hard decisions including merger where this is in the best interest of all the farmers concerned and can optimise milk prices,” he said.
“Finally, we are asking that co-ops take our proposal on board, and report the outcome of the business review to their dairy suppliers within the shortest possible timeframe, so that they can be assured that their co-op is maximising processing efficiency and milk price,” Mr Downey concluded.