Chairman Sean O’Leary said that, at its meeting last Friday, the IFA National Dairy Committee set out its strategy to actively lobby co-op board members to hold the October milk price, and build upon the constructive relationship created during the year.
He said Committee members were aware that poor prices are currently being masked by big volumes and strong constituents. However, they are equally clear that – even with unchanged milk prices – the cash flow situation will worsen dramatically next spring because of higher costs and lower butterfat and protein. The Committee fears the impact this will have on farmers primarily, but also on the entire dairy sector.
“Farmers have taken a massive milk price hit of 13 c/l in 18 months which will, when current exceptionally high volumes and constituent levels drop, cripple their farm cash flow next spring, even if there are no further price adjustment in the interim. This 33% price decrease is equivalent to a total decimation of their margin – a 93% fall,” Mr O’Leary said.
“We have recognised throughout the year that co-ops have supported milk prices, and in this first year after quota, it is farmers’ legitimate expectation that the businesses they own would continue to do so to help them cope with exceptional and new volatile circumstances,” he added.
“Markets are proving challenging for somewhat longer than expected, especially for powder, but there is a real difference between European and global market prices as measured by GDT. Within Europe, which remains our main market by far, butter, SMP, WMP and cheese prices as reported by the EU Milk Market Observatory have all increased steadily for the last 2 months. Their average returns at the end of October, at just under 30c/l is up 1.5c/l since late August, and comfortably underpin the prices currently paid by co-ops,” Mr O’Leary said.
“Even a possible adjustment of the Ornua PPI for October is unlikely to reduce its milk price equivalent much below 26c/l incl VAT, and would therefore continue to justify the payment for October of current (September) milk prices,” he said.
“It is with this in mind that the IFA National Dairy Committee will continue to constructively engage with their local co-op board members, firstly to seek that they would hold the October milk price, and secondly to discuss further support options going into next spring,” he concluded.