Farmers must further tighten their winter supplies to their liquid milk contracts, and remove the comfort for dairies and retailers that has contributed to systematic undercutting and erosion of value in the liquid milk chain. This was one of the main messages to come out of last night’s IFA Liquid Milk Rally in Portlaoise.
Opening the meeting, IFA President Joe Healy said that the fresh milk sector within the Irish dairy industry is under appreciated and taken for granted by dairies, retailers and consumers.
He said the sector is worth more than €400m at retail level, which is 13% of the value of our total dairy exports – a vital contributor to the dairy sector, with a stable return from the retail trade.
There is clear evidence that farmers have been scaling back their autumn calving dramatically in the last two years – by 16% and 12.4% respectively.
The industry and retail trade must wake up and respond, or risk running short of locally produced, quality fresh milk in winter, Joe Healy warned.
IFA National Liquid Milk Chairman John Finn added: “We are frustrated, as farmers, to be struggling every year a little more to secure winter payments that reflect both the high and stable returns from retail milk, and which allow us to cover our costs. We haven’t been able to do this in the last three years at least, and especially last winter. Dairies must engage for 2016/17, and beyond, and ensure farmers are paid a price that justifies their continuation in the specialist liquid milk production system”.
“This year, we are seeing more farmers voting with their feet, just like young farmer Peter Farrell who spoke at our meeting, and who, with his father, decided to transition out of liquid milk because it didn’t pay to stay committed to their contract,” he said.
“I believe we must look beyond an annual struggle to negotiate what have been unsatisfactory winter prices or premiums for producers for the last few years. We need to develop a real strategy for the fresh milk market: winter supplies are threatened by farmers reducing autumn calving, and transitioning out of liquid milk, encouraged this year by the EU production reduction scheme. There is also the real possibility that in 2 years’ time, Brexit related import tariffs will put in question the 25% of the fresh milk we import from Northern Ireland,” he said.
“IFA will be seeking to sit down with Minister Michael Creed to have him preside over an assembly of all the stakeholders to force all parties to face up to the threats on the sector, and the need to develop a sustainable strategy for its long term future. We then need this strategy to be integrated into FoodWise 2025. In particular, we need:
- An end to one-year retail tenders which promote a downward wholesale and farmer price spiral, and which are the very opposite of proper commercial relationships, the backbone of sustainable business;
- A complete review of farmers’ contractual arrangements, including pricing systems, to include multi annual commitments giving farmers security, and to secure a fair share of stable return from the retail market, which can vary to offset volatile base milk prices;
- We need a thorough study of the cohort of 1,900 farmers currently involved in liquid milk to establish their age profile, their succession plans and their intentions regarding their production system. It is striking that the number of new entrants to liquid milk has been close to zero, and that succession to a son or daughter often involves a shift to more economically viable spring production.
- More generally, we need stronger retail regulation, with a return to the prohibition on below-cost selling, and the introduction of an independent, well-resourced Ombudsman, to oversee fair trading relations in the food chain and a sustainable remuneration of primary producers.
“I will work hard with the National Liquid Milk Committee and the full support of IFA to pursue all these issues in the coming weeks and months. In the short term, I urge dairies who are currently negotiating with their suppliers to see to it that the winter remuneration they will pay this winter covers farmers’ costs and give them the boost in confidence they need to renew their commitment to a costly and labour intensive production system,” John Finn concluded.