Margins for dairy farmers will “be completely wiped out” if there is a further round of price cuts for March milk, one farm organisation has warned today (Thursday, April 6).
According to the Irish Creamery Milk Suppliers’ Association (ICMSA) the base price of milk needs to be held, at the very least, at current levels throughout 2023.
Noel Murphy, chair of ICMSA, said co-ops have implemented “massive cuts to farmgate prices” in the first two months of the year.
He believes that co-ops should use the next round of milk price announcements to “define and emphasise the benefits of our products” and raise them above base commodity spot prices.
“Commodity spot prices spent over four months in the early to mid-60sc/L in 2022 and the highest base price returned was 58c/L in 2022,” Murphy added.
“There is no doubt that prices had to come back, but it is now approaching a level where costs of production are coming close and, in many cases, exceeding the base price.”
Murphy said analysis by ICMSA suggests that the cost of production in 2022 “was more than 40c/L when fertiliser was purchased at the the height of the market”.
He said while it is generally acknowledged that farmgate price will not reach “the highs of the wholesale markets” the ICSMA also believes that farmgate price should “never go as low as the bottom falling wholesale price”.
According to Murphy, escalating costs have become a significant challenge for dairy farmers.
He said that the February milk price “was at or exceeding the cost of production” and highlighted that this was before a farmer’s own income had been factored in.
“We are getting dangerously close to the disastrous ‘crossover’ point where costs per litre exceed co-op payment.
“That can’t happen and there’s no need for it to happen if the co-op boards do their work and get after the value that they have always insisted they’ve built into our products,” Murphy added.
According to the ICMSA chair the “savage cuts” in milk prices are taking place at a time when consumers are still bearing the brunt of food price inflation.
“Someone along the line is effectively taking the farmers’ margin,” Murphy stated.