ICOS examines ‘lock-in’ milk prices to curb future market volatility

The Minister for Agriculture, Food and the Marine, Simon Coveney TD met ICOS dairy co-operative chairmen this week for a mutual sharing of viewpoints relating to the future of the Irish dairy industry.

The discussions focused on initiatives to curb the impacts of market volatility post Quota and associated risk management tools that might be used to protect market returns.

ICOS stated that a concerted national effort is needed to assist farmers in managing  increased milk production and the inevitable price volatility that will characterise global markets, both for dairy products and for supply inputs. Irish markets have had substantial volatility over the past five years even with  a Quota environment to control supply, it added.

ICOS President Bertie O’Leary and the minister agreed that in the first instance co-operatives should use existing market management tools to maximum effect, while acknowledging that they will have a reduced impact because  of the fact that they are now being  activated at extremely low price levels.

In addition, ICOS and the minister committed to explore and develop additional optional risk management tools, possibly based on futures. These  would give farmers the option of locking in at least a proportion of their milk at reasonable price levels to protect from market volatility.

ICOS president Bertie O’Leary said: “It is inevitable that uncertainty about potential supply increases will result in increased volatility risks, at least in the short term. As milk suppliers plan to expand their business and expose themselves to higher debt levels, ICOS will explore all possible instruments to help farmers and their co-operatives to manage volatility in a manner that gives them the option of reducing their exposure to unpredictable markets.”

O’Leary said that Europe is significantly behind the US in the development and use of market tools to manage price volatility.

“Useful initiatives have already been taken by some of our co-operatives in the area of fixed price schemes, however, more work needs to be done on a collaborative basis to identify and develop appropriate income stabilising tools for farmers.  Tools need to be designed that will give farmers confidence in their reliability and transparency.  That will be essential for maximum uptake and impact,” he said.

ICOS meeting with Minister for Agricuture Marine and Food, at the Department of Agriculture. Picture Colm Mahady/Fennells Fennell Photography

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