Co-ops have to reflect ‘generally positive’ dairy market situation

Last month’s milk price increase from some co-ops has been welcomed by Irish Farmers’ Association (IFA) National Dairy Committee chairman Tom Phelan.

However, farmers in other co-ops were left behind, the chairman noted.

The latest Ornua Purchase Price Index (PPI) for August, released today (Thursday, September 3) is up to 101.8, which confirms the continued upward movement in market sentiment, according to the IFA.

Ornua Value Payment and ‘IFA adjusted PPI’

The Ornua PPI also discloses the Ornua Value Payment, which includes the value from premium, non-commodity products and the monthly trading bonus.

This payment is now being made monthly on a pro-rata basis to all member co-ops and is available to them when determining their farmer milk price.

When the “adjusted IFA PPI” is applied, Phelan noted that the Ornua value payment is equivalent to 1c/L. This brings the total payout to 30.4c/L including VAT, up from 30.29c/L including VAT, he added.

“Those processors which failed to increase their price last month have to step up this time. Markets have remained much steadier than some of the predictions we heard at the onset of Covid-19,” the chairman said.

“The price cuts in April and May came too soon and were too severe. As the markets didn’t suffer as much as expected, co-ops should have reserves to increase the prices paid out to farmers,” he said.

Phelan said that because of recent weather conditions, production costs on dairy farms have increased and farmers need the maximum returns.

According to the Focus on Agri-food and Beverages report for August 2020, the Department of Business, Enterprise and Innovation predicts the total income reduction across the primary agricultural sector in Ireland in 2020 will range from €0.7 billion to €1.6 billion, with the reduction in average farm incomes projected to be greatest on dairy farms, in absolute terms.

“Some co-ops have the capacity to improve returns and lift themselves off the bottom of the price table. Suppliers expect the August price to reflect this,” he said.