Anticipating a round of reductions to co-op milk price offerings this month, the Irish Creamery Milk Suppliers’ Association (ICMSA) nevertheless said it would be “galling” to see co-ops cut price in line with the most recent Ornua Purchase Price Index (PPI).
Ger Quain, the chairperson of the association’s dairy committee, said that farmers had “obviously accepted” that – due to the effect of Covid-19 – markets had experienced a downturn, which would be reflected in price.
However, Quain noted that some co-ops had been “lagging behind” the PPI for “at least 18 months” while the index was rising.
“We repeatedly asked for an explanation around the differential that ranged from 1.5c/L to 2c/L between what the co-ops were receiving and what those same co-ops were paying their farmer suppliers,” Quain said.
“Having happily lagged the Ornua Index on the way up, we see that as soon as the Ornua Index turns…some co-ops immediately cut farmer price by the same margin,” he declared.
Quain added: “It’s very galling to see co-ops who were quite content to lag the Ornua Index 10 or 12 weeks ago, when it indicated that they were underpaying their farmer suppliers, suddenly fall back into step with a falling index and cutting their prices by the same margin.”
On the issue of prices going forward, Quain believes that there are some signs of “optimism”.
He highlighted China’s “smooth re-emergence from Covid quarantine” and that a demand for products with long shelf-life would benefit Irish powder exports.
He also argued that the question of forward selling was also a silver lining, saying: “It’s obviously very difficult to know exactly what contracts were made for this year but we can look back to 2018 and 2019 and extrapolate from that.
We suspect that a great deal of product has been forward-sold and that a smooth reboot of the sector overall will depend then on an equally smooth reboot of normal consumption patterns, specifically the EU food services sector.
Concluding, Quain said: “The next couple of weeks will be critical, but there are hopeful signs that the scale and timing of the required measures are finally being understood in Brussels, and plans are being prepared accordingly.”