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IFA: Co-ops Unfairly Cautious When Higher Milk Prices Justified for May Milk

11 June 2019

IRELAND - Speaking only days before the first co-ops decide their May milk prices, IFA National Dairy Chairman Tom Phelan yesterday said that a price increase of at least 1c/l was justified in most cases, especially for those co-ops which have been paying less than the Ornua PPI equivalent for the last few months.

Mr Phelan said: "All indicators we have been monitoring for the last couple of months have returned more than the main Irish co-ops have been paying. The May Ornua PPI, which tracks the products and prices traded for the month in question and is therefore very representative of Irish co-ops’ activity, at 30.45c/l + VAT, is only matched or bettered by the 4 West Cork Co-ops. Since April, with co-ops cutting prices and the Ornua PPI increasing by 1.4 points, the gap between co-op payouts and the Ornua index has in fact widened.

"Beyond the Ornua PPI, the EU MMO for early June would return an Irish milk price equivalent of 30.81c/l + VAT (32.47c/l incl VAT) after deduction of a notional processing cost of 5c/l. Average EU spot quotes for butter and SMP on 5 June would have returned a milk price equivalent of 32.02c/l + VAT (33.73c/l incl VAT) using the same processing cost.

"A drought induced downturn in New Zealand output (-8.4 percent for April) could influence early 2019/20 production and help maintain the supply/demand balance to sustain higher dairy prices.

"It is clear that Irish co-ops are being overly cautious, and are denying farmers the real current market returns, making them pay for potential impact from Brexit which have yet to materialise. Meanwhile, markets are returning more than they are paying back to farmers – this is unfair, when this is the time dairy farmers generate the bulk of their income, and paying back last year’s massively increased bills is taking every available cent.

"There is clear scope for co-ops to increase the price they pay to farmers, in most cases by at least 1c/l for May milk. I urge co-op board members, when they sit down to decide in the next few days, to see to it that this is passed back to their fellow dairy farmers."


*April 2019 milk price as per Farmers’ Journal Milk League at 3.3 percent protein, 3.6 percent fat.
[Graph: IFA]

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