14 Apr 2011
RECKLESS MILK PRICING THREATENS LIQUID MILK MARKET SUSTAINABILITY – MULLIGANLiquid Milk
IFA National Liquid Milk Committee Chairman Padraig Mulligan today (Thurs) said dairies and supermarkets must call a halt to their reckless pricing behaviour or render the entire Republic of Ireland liquid milk market uneconomic and unsustainable.
Mr Mulligan urged dairies and retailers to give consumers value without endangering the viability of specialist liquid milk producers who need an annualised price of 38c/l + VAT to cover their costs and pay themselves a modest wage.
“In the last week, Tesco UK have increased the price they pay their directly contracted suppliers by 1.6 pence per litre, over 3 ppl more than other UK milk purchasers, in direct recognition of fast rising production costs. In Spain, supermarkets responded to farmer protests by formally agreeing to cease discounting liquid milk in order to help protect farmers’ livelihoods,” Mr Mulligan said.
“Contrast this with what is happening in Ireland. Dairies failing to recognise farmers’ increased production costs by paying viable milk prices, but fighting destructive turf wars by offering milk to supermarkets below cost; distressed greengrocers and corner shops selling imported milk at a loss, sometimes for less than 50c/l, in a desperate bid to attract consumers; and large multiples watching anxiously and threatening to follow suit to protect their reputations, at the risk of destroying the sustainability of the entire liquid milk market and production system in the Republic of Ireland,” he added.
“Our analysis in IFA suggests that the current 75c/l private label retail price point is the strict minimum return needed in the retail chain to remunerate all the links, including milk producers. While a much greater percentage of this retail return must be passed back to the producer, what is clear is that anything below that price point involves distress selling at a loss, and is by definition unsustainable,” Mr Mulligan said.