Concerns raised on ‘massive divergence’ on farm milk prices

There is a “massive divergence” in milk prices that the present Ornua Purchase Price Index (PPI) is generating when compared to past prices paid when the index was at similar levels, according to Ger Quain.

Quain – Dairy Committee chairman of the Irish Creamery Milk Suppliers’ Association (ICMSA) – said that many farmers were highlighting the significant shortfall in the price that they were receiving at present when compared to the prices they had received in the past, when the PPI was the same.

He noted that as recently as last year, when the Ornua PPI was at the same level as this August 2018, a farmer milk price of 33.5c/L was being paid – compared to the average of 32c/L being generated by the present PPI.

He added that the divergence could be explained if there was a dramatically rising or declining market either then or now, but this is not the case given the relative stability in the last 18 months.

“The variation in the PPI from January 2017 to present is only 10 base points or 3c/L.

“Milk processors need to explain why their prices have lagged the PPI since May 2018 – and are still lagging it.”

Quain said that they should also explain why the 2017 index paid 1.5c/L more than the same index this year, something that must be shown, particularly given the increase in costs in 2018.

A 2c/L difference between the PPI and price paid to farmers for the months for May to August is the equivalent of €70 million loss for dairy farmers in what is probably the most challenging year for dairy farmers in decades.

That figure would clear a lot of merchant credit debt currently unpaid on dairy farms, he noted.

“Farmers are only looking for the same price that their processors have themselves received and it’s not too late for milk purchasers to make up for lost time by starting with a September milk price rise,” the chairman contended.

“The facts are as stated and silence is not a response. Farmers are on their knees financially; the processors know that and simple fairness should dictate that they pay at least what they themselves receive,” Quain concluded.