17 Oct 2014
NATIONAL DAIRY COMMITTEE SHOCKED BY EXTREME PRICE CUTS AND DEMANDS BETTER FROM IRISH DAIRY BOARD AND CO-OPSDairy
Speaking after an emergency meeting of the National Dairy Committee, also attended by IFA President Eddie Downey, Chairman Sean O’Leary said members had expressed farmers’ dismay at Glanbia opening the door to extreme price cuts by co-ops. He said that, although markets are weakening, returns for the month of September did not warrant the massive 2 to 3c/l price cuts implemented by some co-ops. An urgent meeting is being sought by IFA with top Glanbia management and the other main co-ops to establish their pricing policy for the next period. If farmers are to deliver the Food Harvest 2020 milk growth, the IDB and co-ops must all step up to help them manage the challenges of running and growing a dairy farm through market volatility.
“We need more from our co-ops than monthly price cut announcements. We need to see an industry strategy to provide sustainable milk prices, in which the Irish Dairy Board must play a central role,” Mr O’Leary said.
“It is crucial for the short term that Brussels takes all necessary action to rebalance markets. The Russian ban, the result of geopolitical decisions, is having a huge impact. Minister for Agriculture Simon Coveney and incoming Commissioner Phil Hogan must ensure that the same political process addresses the consequences of the crisis for farmers,” he said.
“At yesterday’s meeting, our Committee members clearly stated that the decisions made by our leading milk purchasers on their September milk prices have angered dairy farmers. Glanbia, who were first off the blocks, were criticised for their extreme 2.5c/l milk price cut unwarranted by September returns. While the top ups used by Glanbia to offset some of the cuts were acknowledged, concerns were expressed about the lack of transparency in pricing they are creating. There were also tough questions asked about some of the business decisions which may have led to the extreme cut,” Mr O’Leary said.
“The Committee was also disappointed that the Glanbia decision has been used by other milk purchasers to apply higher price cuts than planned, or warranted on September milk. The Irish Dairy Board index for September would have justified a VAT inclusive price of 33.9c/l,” he added.
“What worries farmers most is what the price will be next spring. Margin is all important, and costs have risen steadily: last year, Teagasc found that production costs averaged at 27.4c/l, a 47% increase since the year 2000,” he said.
“The price levels at which Glanbia, Kerry and some of the other milk purchasers will enter the winter are simply too close to production costs to allow farmers make the type of investment needed to fill the processing capacity being newly built or upgraded. Co-ops, in conjunction with the IDB, must provide hedging and other risk management options to help farmers manage the impact of volatility on their income,” he concluded.