Dairygold has announced an increase in the price it will pay to its farmer suppliers who are contracted to fixed milk-price schemes.
The co-op issued a letter to farmers this week, seen by Agriland, in which it explained that this price increase concludes a process to “maximise commercial support from customers, including Ornua, to pass back to suppliers in milk price” that has been “ongoing for several months“.
It added that it has come about as a result of a combination of an “enhanced offer from Ornua and better market returns from secondary ingredients specifically produced from fixed-contract milk”.
Two price increases of 6.25c/L and 5.75c/L, respectively, will be applied to the co-op’s FMP5 and FMP6 schemes.
This will see a minimum quoted milk price of 38c/L at 3.3% protein and 3.6% butterfat, inclusive of quality and sustainability payments, plus VAT, paid to farmers.
Ornua confirms offer
In a statement to Agriland today (July 21), Ornua confirmed that it has made an additional offer of support to its member co-ops. In a statement it said:
“We can confirm that an additional offer of support has been made to member co-ops, to enable them to offer financial relief to those farmers who are experiencing the greatest level of hardship right now.
“We have listened to, and engaged with, all of our members to agree a further level of flexibility for those involved, and we hope that this offer will demonstrate Ornua’s continued empathy and support to those most in need of financial relief at this time.”
Dairygold additional payment
Dairygold’s FM5 scheme covers 2020-2022, while its FM6 scheme covers 2021-2023. The former was priced at 31.75c/L and the latter was priced at 32.25c/L.
Under each FMP scheme, a farmer could commit up to a maximum of 10% of their annual milk supply, and a maximum of 20% under both schemes.
Dairygold’s new fixed-contract price will be reflected in farmers’ July milk cheque – which will be received in August – when they will receive an “additional payment” for milk supplied, year-to-date, up to July 2022.
And farmers will receive additional monthly payments for the remainder of the year.
Signed by the co-op’s chair, John O’Gorman, and chief executive, Conor Galvin, the letter stated that the co-op had “continued to seek more favourable terms from customers, including Ornua, to pass back to FMP suppliers in milk price”.
“Given the exceptional circumstances, an extensive process has been ongoing for several months, to maximise commercial support from customers, including Ornua, and this process has only now concluded with additional value being achieved.
“This value is a combination of an enhanced offer from Ornua and better market returns from secondary ingredients specifically produced from FMP milk.”
The letter continued:
“As a result of this additional value achieved from FMP milk and on an exceptional basis, the Dairygold board, at their meeting of July 19, determined that the minimum quoted milk price for all milk supplied to the society in 2022 would be 38c/L at 3.3% protein and 3.6% butterfat, inclusive of quality and sustainability payments, plus VAT. This is an increase of 6.25c/L on FMP5 and 5.75c/L on FMP6.
“This is the equivalent of 43.1c/L at the society’s 2021 average protein and butterfat results. This ensures that all milk supplied to the society in 2022 will generate a margin and is not loss-making.”
The additional payments to fixed-price suppliers will not reduce the value that Dairygold will pay for variable milk in 2022, the co-op said.
It added that it is willing to assist any milk supplier who has financial challenges and advised them to get in touch immediately.