Tipperary farming: co-ops told they need to do more on milk price

The country's main dairy farm organisation, ICMSA, while acknowledging Glanbia's June milk increase, has said that more still needs to be done.

ICMSA Dairy Committee Chairperson, Ger Quain, has said that while farmers will obviously acknowledge the Glanbia price rise it was still a fact that the Ornua PPI translated across to 32.8 cpl which left Glanbia’s June price to their suppliers still short of what Glanbia itself was receiving.

Mr Quain said that Glanbia “and all other Co-ops” should be treating that Ornua 32.8 cpl price as the minimum base and any discretionary payments - such as the 1 cpl drought payment announced by Glanbia– should be on top of that base price, giving Glanbia suppliers a June milk price of 33.8 cpl.

Glanbia will pay its Member milk suppliers 32cpl, including VAT for June manufacturing milk supplies at 3.6% butterfat and 3.3% protein, an increase of two cent.

In addition, Glanbia will make a drought related support payment to members of 1cpl, including VAT, for June manufacturing milk at 3.6 per cent fat and 3.3 per cent protein.

The Glanbia Ireland base price and the Co-op support payment will be adjusted to reflect the actual constituents of milk delivered by suppliers, according to the co-op.

“We are pleased to increase our milk price for the highest milk volume month of the year. This reflects increased returns, particularly for butter. However, market balance remains fragile, with the impact of trade wars and consumer resistance to higher retail prices being two issues that need to be monitored very closely in the coming months,” said Martin Keane, Glanbia chairman.

However, Mr Quain said that spot prices for butter / SMP in May and June ranged from 34cpl to 37cpl, and while they had softened in the last three weeks, those better prices had fed back into the Ornua Purchasing Price Index.

The PPI has risen by 3.2cpl from April to June, and, not unreasonably, farmers expected their milk price to rise proportionately, he said.

Those milk processors and co-ops who have yet to announce their June price should be following that Ornua trend of the last two months, said Mr Quain.

The dairy chair said that the shortfall that had opened up between Glanbia milk price and that paid by other processors since the start of 2018 had still not been addressed by this rise and will still concern their suppliers.

“Questions will also be asked about the Lakelands June price announcement that leaves their milk price unchanged from May despite the fact that the markets have strengthened since then and also the fact that they, too, are short of the Ornua price,” he said.

national milk report

Meanwhile, ICMSA president Pat McCormack said that the just published National Milk Report reflected that the market share of the five major retailers was a perfect illustration of the power of retailers over of farm families.

The five largest multiple groupings had an 89 per cent share of the Irish grocery market in 2017, compare to 65 per cent in 2002.

“This demonstrates the increasing power these retailers have and there’s no sign of it reversing,” he said.

Mr McCormack said that, in the fresh milk market, 62 per cent of milk sales in retail outlets were sold as “own label” according to the report and these own label sales in two -litre packs were retailed at an average discount of 27 per cent on processors’ brands.

“We can see here, yet again, the problems that inevitably occur in the race-to-the-bottom when milk is used as a 'loss leader' to attract customers,” he said.

ICMSA was not calling for dramatic increases in milk prices but it did support a fairer division of the retail milk price that adequately rewarded the person who did by far the most to get the product to consumer stage, the farmer, said Mr McCormack.

IFA national liquid milk chairman John Finn said the report highlighted the role of retail practices when it came to keeping specialist fresh milk producers viable, and securing domestic drinking milk supplies.

He said this was a welcome recognition, and warned that the current spate of unsustainable discounting threatened the long-term security of fresh milk supplies.

“NMA chairman Denis Murphy states in the 2017 report that he has contacted all retailers expressing the agency’s grave concern that the discounting of fresh milk by some retail multiples is undermining the viability, sustainability and security of the fresh milk supply chain. He states that retail price discounting is devaluing fresh milk and squeezing the economic value needed to adequately pay fresh milk producers to sustain their year-round supplies for liquid consumption,” Mr Finn said.

“We in IFA share this analysis,” he said.