Farmers switching milk purchasers in advance of milk quota abolition has been described by the IFA as a real challenge to co-ops.
The IFA has said that, three months before the end of quotas, farmers are understandably keen to explore their options to switch milk purchaser to secure the best outcome for their business.
It has said to preserve the competitiveness of the sector, co-ops must renew their commitment to suppliers that they will improve efficiencies and secure the best long-term milk price and business value for them.
In its milk and liquid newsletter IFA Dairy Chairman Sean O’Leary said groups of farmers are speaking to alternative milk purchasers, or being sought out by them.
“This is understandable as milk quotas come to an end and farmers want to secure the best long term outcome. We in IFA are clear that farmers are at absolute liberty to move, and co-ops cannot take suppliers for granted.”
O’Leary also said that the IFA takes the view that co-ops must do whatever it takes to deliver the best milk price and long-term value for their suppliers/members.
“This must be done by improving efficiencies through consolidation and cooperative investment, and not exclude the negotiation of balanced merger terms with other co-ops,” he said.
According to the IFA, farmers wishing to jump ship must consider all relevant issues including: Milk price performance and commitment, co-op investment and marketing plans, supply conditions, input costs, merchant credit terms, support in other areas.
All these should be compared with what the new milk purchaser offers, it says.
While the IFA highlights that there is a real danger of splintering milk pools and damaging competitiveness to the detriment of all milk producers.
It also says that it is up to co-ops to present a persuasive business case.