Any co-op paying less than 26.9c/L for August milk are “at variance” with the Ornua Index and are “overstepping the mark” according to ICMSA Dairy Committee Pat McCormack.

The Deputy President of ICMSA has accused some Co-ops of ‘overstepping the mark’ in terms of milk price reductions given the fact that the Ornua Price Index breaks-down into a farmers’ milk price in excess of 26.9/L/

He said this price is based on the very generous processing cost of 6.5c/L estimated by Ornua themselves.

In addition, dairy markets have shown some signs of improvements in recent weeks with two positive GDT auctions while Dutch dairy quotations over the past two weeks have been positive, he said.

The news from Fonterra that its production in New Zealand will be 2-3% lower in the 2015/16 season will certainly have a positive impact on market sentiment, he said.

“Dairy farmers have seen their milk prices slashed over the last 12 months and, while they understand the weakness in the market, they are very clearly now asking whether their processor have imposed cuts beyond those justified by the marketplace and ‘overstepped the mark’.

“Any co-ops board that pays less than 26.9c/L for August milk is going to have to explain to their suppliers exactly how they’re arriving at their milk price because their price is demonstrably at variance with the Ornua PPI.”