22 May 2014
IFA URGES CAUTION ON MAY MILK PRICE DECISIONSDairy
IFA National Dairy Committee Chairman Sean O’Leary warned co-ops that their May milk price decisions will have a major impact on farmers’ confidence at a critical time, and urged them to hold milk prices at current levels.
“Yesterday’s GDT auction, which saw a 1.8% weighted average price fall, is further evidence of easing in international dairy market returns. However, the April IDB index, at 128.3 points, would justify a producer price of 37.6 + VAT, which is more than most co-ops pay for 3.3% protein and 3.6% fat milk. Furthermore, returns for an Irish product mix based on EU average commodity prices dated 11th May, at around 43c/l before processing costs, also justify comfortably the current milk prices,” Mr O’Leary said.
“It is critical that co-ops would allow dairy farmers to optimise their income over the peak period. This is essential because of the challenges to cashflow from merchant credit and superlevy bill repayments, and because of the major investment many co-ops expect farmers to make to help finance increases or improvements in their processing capacity,” Mr O’Leary said.
“It is also vital that co-ops realise that the certainties of the last 30 years are coming to an end with the end of quotas. With challenging Milk Supply Agreements having to be signed, and financial contributions having to be made in many co-ops, some farmers will look at alternative options, even if some of those fall short of the security offered by the co-ops. Co-ops cannot take suppliers or supplies to fill their processing capacity for granted, and must develop and communicate their investment plans widely and convincingly so that farmers can be confident of their future,” he added.
“Milk price decisions send a very strong message to farmers. I urge co-ops to boost farmers’ confidence and their willingness to buy into complex and challenging development plans by holding the milk price this month, and for as long as possible,” he concluded.