Early Milk Price Setters Have Crucial Responsibility – O’leary

IFA National Dairy Committee Chairman Sean O’Leary has said that Glanbia and other early milk price setting co-ops will decide on their September milk price in the coming days. He said these co-ops had a major influence on price setting, and therefore farmer confidence, all around the country. With that influence comes a heavy responsibility at a time when farmers are transitioning into the post quota era, and have cost levels which will require milk prices north of 30c/l to allow them cover costs and remunerate their own labour, with more needed to allow for necessary growth investment.

“In the September/October Today’s Farm publication, Teagasc reminded us that we made a slightly higher margin per litre of 12.6c/l in 1995 with a milk price of 30c/l than the 12.1c/l margin we made in 2013 with a milk price of nearly 38c/l – and this despite greater efficiencies, scale, better farming and yields,” Mr O’Leary said.

“If the questions I got from dairy farmers at the Ploughing were anything to go by, the level of price for next spring is their top concern. With costs of around 27c/l for 2013 according to Teagasc, and international evidence confirming that milk is getting dearer to produce in all global milk production regions, milk prices will have to trend higher for production growth to be sustainable,” he said.

“It is clear that long term market trends remain very positive, with even stronger demand growth now predicted by Tetra Pak of 3.6% per annum for the next decade,” he said.

“In the short term, while we appreciate that global market imbalance exacerbated by the knock on effect of the Russian ban has put major pressure on spot and average commodity returns, it is vital that co-ops would demonstrate the value of the quality markets and contracts they have told us they have developed and made a strong commitment to in recent years,” he said.

“This commitment, which saw those customers benefit from lower prices when spots and averages were on the rise, must now come into play. It is crucial that co-ops would make every effort to pay the highest possible milk prices well into next spring, and ensure that farmers can at the very minimum break even for the duration of this temporary market turbulence. This is the single most important decision co-ops can take to protect farmer confidence, and ultimately secure the long term future of the dairy sector,” he concluded.