It doesn’t take a genius to understand that below cost milk production is not sustainable, according to the President of the ICMSA John Comer.
Speaking at a recent sitting of the Joint Committee of Agriculture, Comer said that at the current milk price the solvency of many dairy businesses will become stressed.
“Currently, Irish farmers are producing milk below the cost of production – it is estimated by our scientific body and others that the current cost of production is in the region of 28c/L.
“Glanbia is currently paying 24c/L, it doesn’t take a mathematician to work out that is not sustainable.”
Comer added that the solvency of the farm business could hinder dairy farmers’ plans to expand, especially in a period of low milk price.
“With all this expansion and milk production, there are big borrowings at farm level and all the associated anxieties that are resulting from the current trough in the milk price.
This is having a major impact on the confidence on our members to invest further, said Comer.
The President of the ICMSA added that there is a growing degree of worry among farmers, especially towards the milk price next spring.
“There is a huge degree of anxiety building in rural Ireland about milk price next February and March. Farmers could end up getting a milk price of 22-23c/L based on constituents and that just won’t last even in the short term,” he said.
Farmers need Policies to mitigate against milk price turbulence
Comer added that farmers are in need of tools to help mitigate against the turbulence currently being experienced in global dairy markets.
We were always concerned as to how we could mitigate against this volatility and the simple sum is when you look at global markets we are producing a product that is in oversupply.
According to Comer, there is a deficit of tools that can be used to combat the volatility in the world market, which has the potential to increase the numbers of insolvent farmers in Ireland.
The President of the ICMSA added that the intervention price structure is outdated, and the current intervention price was introduced when the costs of production were much lower.
“The intervention price is structured in the region of 20.4c/L and we feel that this is not acceptable.
“The intervention price is to put a floor in or around the cost of production, when it was brought in that floor was probably correct.
“Obviously, since then, the cost of production has spiralled upwards and the intervention price remains the same and we feel that this is a strong deficit.”
Comer added that the entire dairy industry will need to find a better method of dealing with milk price difficulties.
It wouldn’t have taken a genius to forecast a year ago that we were going to be in this position, so why did we wait for the crisis to develop?
“That is very poor in terms of policy and we have to explore better tools that are currently there.
“We need to have better policies in place which helps offset some of the turbulence that is out there,” he said.