Scope for Milk Price Increases to Narrow Costly Gaps
Improved market returns must be used by co-ops to allow farmers to benefit from the upturn in dairy markets, but also to help narrow the costly milk price gaps that have developed between co-ops in recent months, IFA Dairy Chairman Tom Phelan has said.
Reporting on IFA analysis of the price gaps between co-ops, Tom Phelan said, “A farmer supplying an average of 350,000 litres, whose May production accounts for 13.7% of annual output, faces base value discrepancies varying from €879 less to €487 more when compared to the average of the 8 main co-ops’ base prices for the month of May.”
This analysis deliberately excludes the weather and fodder supports paid on May milk supplies by some co-ops as they are unlikely to last into the future and takes account only of base milk prices net of VAT for milk at 3.3% protein and 3.6% butterfat.
Tom Phelan said, “We excluded the weather/fodder supports in this comparison because they are unlikely to survive as top ups into June but we would argue that they should be incorporated into the base price for June milk. In addition, prices must be further lifted to reflect significant improvements in market returns.
“Co-ops will be deciding on June milk prices in a week or two, and this is their chance to start improving their base price to reflect stronger dairy prices.
“Co-ops must also address the price gaps that have developed. According to our analysis, if the gaps between the prices paid by the main 8 milk purchasing co-ops persist for the rest of the year, a farmer receiving the lower of the 8 prices would earn €4,749 less than if he had received the average price. Meanwhile, if he received the highest of the 8 prices, he would earn €2,632 more than if he had received the average price.”
“This is an unlikely scenario, and would not be tenable, but co-op boards must bear it in mind in their decisions. Farmers need them to pay a competitive milk price as well as a milk price that fairly reflects the improved value coming back to co-ops in recent weeks. While there is no question that the Farmers’ Journal’s KPMG Milk Price Review is the best measurement, our Committee is adamant that it is simply unfair to be asking farmers to wait more than a year to satisfy themselves of the relative competitiveness of their co-op’s milk price,” Tom Phelan concluded.