‘Milk price should be based on value-added basis not commodity’

Processors should be concentrating on marketing Irish dairy products rather than attempting to ‘soften up’ dairy farmers for milk price cuts according to Pat McCormack, Deputy President and Chairperson of ICMSA’s Dairy Committee.

He said that despite the negative soundings currently coming from milk processors in relation to milk price, the facts are that there is no justification for a reduction in milk price and milk.

“While markets have weakened somewhat in recent weeks – which everybody should have anticipated immediately after quota abolition – we are going through an extremely uncertain period and kneejerk decisions in relation to milk price would be very detrimental to farmers’ incomes as well as damaging to the overall confidence in the sector.”

He said that the Irish Dairy Board index at 98.9 only fell slightly on the March level and it’s very striking to note that in April 2012, when the index was below this level, Irish processors on average returned a milk price to farmers of 31.5c/L, which is higher than the milk price paid for March milk this year.

“In addition, despite the additional milk going onto dairy markets, ‘spot’ market prices are holding up reasonably well with reported prices returning 30c/L for commodity butter and SMP with similar price levels in the UK”, said Mr McCormack.

He also said that considering the massive investments made by our processors in improved facilities to deliver higher value-added and by Ornua (formerly the Irish Dairy Board) in marketing initiatives and routes to market, farmers rightly expect that milk price now being returned to them should not be a commodity price but a price based on the value-added products that our processors are now producing.

“Farmers are investing in this processing and marketing capacity and we now expect a return on this investment through a milk price well above the commodity price, otherwise we can justifiably ask ourselves: What was all this investment for?

“It is hugely important to remember that the next three months will determine the success or otherwise of the 2015 milk year for dairy farmers, many of whom have had very severe superlvy fines imposed upon them, and dairy farmers will not accept a scenario where milk price reductions are implemented that are not justified by the prevailing market.

“Dairy farmers have invested in the processing and marketing capacity, processors had an excellent 2014 and it is critical that they deliver a strong milk price for dairy farmers over the coming three months,” he said.

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