IFA National Dairy Committee Chairman Sean O’Leary has rejected the notion that the decision by Glanbia to cut May milk prices by 2c/l was the beginning of an inevitable ‘slide’ which would see all other milk purchasers follow suite.
“Co-operatives have different product mixes, markets and contracts, costs, seasonal production patterns, etc. It makes little sense that just because one makes one decision on milk price, the rest will do exactly the same at the same time,” Mr O’Leary said.
“We have shown that average EU returns for a representative Irish product mix have exceeded 42c/l for all of the month of May 2014 – allowing for 5c/l processing costs, this should allow co-ops to cover their costs and maintain their April milk price,” he said.
“Let us not forget that co-ops have accumulated historically high levels of profits in 2013, as proven by their financial reports, and have also benefited from €13m of dividends and bonuses paid for their trade through the Irish Dairy Board,” he added.
“While many have paid bonuses on 2013 supplies, given credit for input purchases, or established “volatility funds”, the total that was passed back is nowhere near as high as the €86m we estimate the ‘fat’ in the system to currently amount to for the Jan 13 to Jun 14 period – and this calculation assumes a level of weakening in the IDB index for both May and June,” he said.
“Co-ops also need to be conscious of their farmers’ cash flow needs, dented as they are by large superlevy and merchant credit bills, and allow them optimise their incomes at peak – something they have not been able to do in recent market upturns. This will be essential not only for farmers to fund their business, whether in expansion mode or not, but also to maintain crucial goodwill towards the co-op in changing times,” he concluded.