Co-ops Must Make Commitments to Year End on Milk Payout and Address Growing Gaps – Phelan

IFA National Dairy Committee Chairman Tom Phelan today (Wednesday) said co-op board members would meet in coming days to decide on their August milk prices and consider the situation to year end.  This must be the occasion to look back on an extremely challenging farming year, and to support hard pressed farmers, to make a commitment to year-end to first roll all top ups into base milk prices, and to return the strongest price markets allow right to year-end.  Mr Phelan added co-op board members must also take stock of their pricing structures, and restore price transparency and competitiveness by addressing growing milk price gaps.

“Whatever about the slight easing in the first GDT auction of September, European dairy indicators were all firmer at the end of August.  As per figure 1 overleaf, they all suggest milk price equivalents based on late August market returns in the low to mid 30’s before VAT, well above the July Ornua PPI and the average milk prices paid by Irish co-ops for July milk,” Mr Phelan said.

“We believe there is scope for co-ops to make a firm commitment to at the very worst hold current payouts at least till the end of the year,” he said.

Addressing the price gaps (figure 2 overleaf) which have developed as a result of the different support approaches taken by the main 8 co-ops, Mr Phelan added:  “Co-ops have really come up trumps for farmers in the face of the weather challenges of 2018: free credit facilities for feed and fertiliser purchases, deferred payments, rebates on inputs, top ups to milk prices, fodder imports are all much appreciated by farmers under unprecedented fodder and cash flow pressure”.

“This should not interfere with the payment of competitive, transparent prices reflecting real market returns.  Yet, big price gaps have developed in 2018.  At the very top for most of the period, and pulling up the average, the West Cork Co-ops, at the bottom, Glanbia. While it may well be that merchant credit facilities, deferred payments and rebates will make up some of the difference for farmers, we have calculated that a 350,000 litre supplier January to July milk supply could vary in value by up to €5,300 purely as a result of the price gaps,” he said.

“I call on all co-op boards to examine carefully this month not only their August milk price decision, but also in the case of the lower payers how they propose to close the gaps that have developed,” he concluded.

Figure 1 – International dairy indicators

Figure 2 – January to July Irish milk prices paid by the main milk purchasing co-ops based on FJ Milk Price League