‘Who benefits from volatility?’ – Processor price cuts lambasted

Milk price cuts announced by Glanbia and Kerry raise fundamental questions about the continued lack of price transparency and whether parts of the supply chain are benefitting from price volatility, according to the Irish Creamery Milk Suppliers’ Association (ICMSA).

Commenting on the issue, Gerald Quain – the ICSMA’s dairy committee chairman – said: “The decision of both Glanbia and Kerry Group to cut their milk prices for February by 3c/L and 2c/L respectively is a major blow to farmer confidence as we head into the peak milk production months.

It shows scant regard to the challenges facing farmers, like the still adverse weather conditions, fodder shortages, and increased input costs.

Continuing, the chairman said: “There’s a recurring pattern here that has processors imposing more and more standards and conditions on their farmer-suppliers on the basis that we can move up the value chain and achieve higher prices.

“But then you have decisions like these; farmers are justifiably questioning how milk prices can be cut to such an extent and, just as importantly, who is gobbling up the margin that has been taken from the farmers on foot of this decision?”

Price volatility

Quain continued by noting that, in terms of price volatility, the farmer is consistently taking the hammering while still waiting for the long-promised and much-trumpeted transparency in the food supply chain – so that all links in the food supply chain can clearly identify exactly who benefits and gains from this volatility.

“While farmers understand that markets have been under pressure since late 2017, there has been a demonstrable improvement since the start of 2018 and we cannot continue to see farmers – and farmers alone – be completely exposed to a marketplace that is dominated by large multinationals.

“The decisions of Glanbia and Kerry – given their product mix, scale and investment in value added – is hugely disappointing for farmers.”

The chairman said that the very abrupt and significant scale of the price cut makes a “glaring contrast” with their actions when milk price was strengthening.

“Farmers have invested heavily to meet milk processor demands and for farmers to be sustainable, they cannot be subjected to further cuts in milk price” Quain concluded.