Why Full Dairy Market Recovery Must Be Passed Back to Farmers

IFA National Dairy Chairman Sean O’Leary has said the National Farm Survey results showing a 17% fall in 2016 dairy farmers’ incomes confirmed the fact that farmers have taken the brunt of the dairy downturn.

While co-ops clearly supported milk prices in 2016, which reduced but did not eliminate profits, Irish dairy and ingredients exports increased 2% to €3.38b, and the dairy recovery is continuing in earnest into 2017 – but farmers have not seen the full benefit of it.

Mr O’Leary urged co-op board members, who will be meeting from this week to decide on May milk prices, to return a price uplift of up to 2c/l.

“Farmers have been worst hit by the market downturn in 2016, when their income fell 17% despite a 4.4% increase in production. Milk prices increased around 7.5c/l between July 2016 and February 2017, but have stagnated ever since. While co-ops may be tempted to further rebuild their balance sheets, we believe tarmers must not be denied the full benefit from the recovery which started 12 months ago, and has been strengthening further,” Mr O’Leary said.

“Farmers recognise the effort made by co-ops to support milk prices in 2016, and while this softened the blow, it did not protect farmers from significant income reductions and cash flow stresses in 2016, as highlighted by the NFS results published last week,” he added.

“Both global and EU dairy prices have been rising strongly in recent weeks. EU butter prices as quoted by the EU Milk Market Observatory for 28th May 2017 have increased by over 18% since this year’s trough in early March. SMP prices have lifted over 7% since late April, while WMP is up 6.5% over the same period. Cheddar prices are up 5.5% and whey powder prices over 7%,” he said.

“An Irish product mix based on the quotes from the EUMMO would yield a current farm gate equivalent price, after deduction of 5c/l processing costs, of 33.52c/l + VAT (35.33c/l incl. VAT),” he said.

“We are very clear that, as co-ops have increased sales significantly in recent months, and as dairy prices are recovering to, in the case of butterfat especially, historical levels, there is real scope for further milk price increases to be passed back to Irish dairy farmers,” he concluded.

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