ICMSA say coops must reflect market growth in better prices

BASED on the latest 6.6% increase in the GDT (Global Dairy Trade) auctions and the milk prices being quoted on European spot markets, there is growing evidence to suggest that the lift currently underway in dairy markets will continue, according to Gerald Quain Chairperson of ICMSA’s Dairy Committee, who continued to say that these increases must be reflected “at the first opportunity” in the prices paid to farmers – most specifically by those Co-ops currently paying less than 23 cents per litre.

The ICMSA Committee Chairperson said that Dutch Dairy quotations have rebounded in the last number of months with butter/SMP returns up 21% since their lowest point in March and WMP up 20% since its lowest point in mid-April.

While acknowledging that these percentage increases are from a low base Mr Quain observed that they nevertheless represented an increase of 5 cents per litre up to 25cpl at farm level inclusive of VAT. He said that a number of factors were combining to indicate that better returns are already achievable: a tightening occurring in the global supply situation across Europe and New Zealand, lower milk production in Australia due to adverse weather, and a ‘pick-up’ in demand coming from markets.

All this was moot, according to the ICMSA Chairperson, if farmer-suppliers were left wondering why the positive indicators are not feeding back into their milk price.

“The last 18 months of low market returns were inflicted on all dairy farmers regardless of the increased quality base and the much hyped diversification of products sold by processors and Co-ops. Farmers had hoped they would, to some degree, be insulated from rock bottom prices by that high-profile diversification program engaged in by our processors but prices received by Irish farmers are only one to two cents per litre higher than that of New Zealand who traditionally sell base commodity products and who are a great deal further geographically from major markets than we are. The latest LTO price comparison shows Fonterra paying 20.11 Euro per Kg while the Irish processor returns a mere 0.89 eur/kg above them at 21 eur/kg. This makes a mockery of the much touted move to value added products when we see our farmer prices are on par with the main producer of commodity dairy products in the world and one, moreover, who must transport these product huge distances to reach market access”, stated Mr Quain.

The introduction of the voluntary production reduction scheme – which ICMSA was alone in advocating - has given farmers’ options and Mr Quain said that if Co-ops want milk supplied in the last three months of 2016 they are going to have to respond with higher prices. With the option now of a payment that might cover all overhead costs for those months, farmers will think long and hard about producing milk at a time when direct costs can be significantly higher than other months.

“The Co-ops are going to have to do two things immediately if they want to be able to count on anticipated supplies of milk in the last quarter: they’re going to have to get more hard-nosed in their deal-making and really get the best prices in a rising market and, secondly, they’re going to have to pay a price to their farmer-suppliers that makes it worthwhile to pass on the voluntary reduction production programme. In short, they’re going to have to ‘Up their game’ - and very considerably at that”, concluded the ICMSA Dairy Spokesperson.