Kerry Group is currently working on a new contract for its milk suppliers, according to the head of the company’s dairy division.
Pat Murphy, the chief executive of Dairy Ireland, told Agriland that they have been getting “a few” questions from milk suppliers on the issue.
“Our current contract with suppliers expires in April 2026. We’ve told the board of Kerry Co-op that we’re currently in the process of drawing up a new contract and that will be available over the next number of months.
“We will always pick up milk, we will always collect milk from suppliers in any part of the catchment area.
“So suppliers should have no concerns about Kerry not picking up their milk after April 2026. We will continue to do so,” he said.
Kerry Group
2023 represented a turbulent year for Dairy Ireland as revenue dropped to €1.2 billion (2022: €1.5 billion) and volumes were back 6.5% due to a sharp reduction in dairy market prices.
Murphy said that following the record highs in 2022, milk prices dropped by up to 40% last year.
Although there has been a stronger start to 2024, he noted that the poor weather conditions in recent months had been “crucifying to farmers across this catchment area”.
He said that Kerry Agribusiness has been supporting farmers in desperate need to secure fodder from across the country.
“We’ve sourced about 2,000t of fodder or feed over the last three or four weeks.
“The government subsidy around transport was critical because otherwise it would have been very, very expensive to get stuff from one part of the country to another part,” he said.
Murphy estimated that milk supplies are back by approximately 10% to-date this year due to several factors.
“Last week, we were back about 6%, so the deficit is getting smaller. We think that at the end of the year, we’ll be back maybe 3-4% from last year, and last year we were back about 5%.
“Weather is one thing that has affected the supply of milk from our farmers, but I think the whole issue around nitrates, regulations and environment has had a lot of negativity over the last 12 months in the media.
“Farmers aren’t sure what to do next. Things like slurry storage or expansion of farmyards. They’re waiting to see how this derogation pans out over the next number of months,” he said.
Milk price
Kerry Group’s milk pool has grown by around 25% over the past decade, whereas some other milk processors have seen their milk pool increase by between 50-80%.
Murphy said that Kerry’s ambition for the coming years is to add value to its milk pool and get a better return to farmers.
The company has invested €30 million in its Cheestrings facility in Charleville, Co. Cork which will increase capacity by 50%.
As we enter peak milk production months, Murphy is anticipating that the milk price will remain relatively stable.
“Milk prices today are a little bit higher than what the market is returning, unfortunately,” he told Agriland.
“The market seems to be fairly static over the last number of weeks. We wouldn’t see a whole lot of change in milk prices over the next three to six months. If it stays as it currently is, I think we’d be doing well.”
The Dairy Ireland chief executive said that global milk supply has been impacted as cow numbers are back in the US, while western Europe has been static for the past four months.
“We think that profitability in western Europe for farmers will increase over the next number of months because milk price is quite high and input costs are coming down,” he continued.
“We might see a little bit of an increase in milk supply coming out of Europe in the second half of the year, which obviously won’t be good for milk price,” Murphy said.
Last month, the Munster Dairy Producer Organisation (MDPO) last month secured formal recognition from the Department of Agriculture, Food and the Marine (DAFM).
The producer organisation (PO), which had yet to open for members, has been spearheaded in recent months by a group of Kerry Group milk suppliers.
The suppliers, who held meetings and participated in protests last year, are unhappy at the milk price being paid by Kerry.