Cuts to milk prices have been described as "horrendous" by a farm organisation.

The Irish Creamery Milk Suppliers Association (ICMSA) has said the recent history of milk price "boom and busts" demonstrated a "primitive market that protected every other component through the expedient of loading all the risk onto the farmer-producers".

ICMSA dairy committee chair, Noel Murphy has said that attributing the steep fall in milk price to a "simple over-supply relative to demand" was to "ignore what was actually a much more fundamental problem with the existing dairy pricing system".

Milk price cuts

He said that links further up the supply chain are using farmer price and farm income as a "market correction device and a risk management tool".

According to Murphy, other players along the chain "protect their own position in the knowledge that our reduced milk price and wiped income is effectively the reset button for the whole cycle to start again".

Murphy said that everybody understands that dairy markets have weakened in recent months with little warning.

However, Murphy said: "The markets suddenly weakens and the farmer takes the hit straight away.

"This is an absolutely primitive way of managing a sector.

"It’s utterly destructive and it’s simply unsustainable for the family dairy farm to be the only ones left holding the baby when the markets fall."

Income loss

According to the ICMSA, the farmer milk price reductions over the last two months would represent a "loss of €32,000 if applied to a full year for a 400,000L milk supplier". 

“Who else is expected to just take an income hit like that?" the dairy chair continued.

"Is there any other sector where people are just expected to do the same work and actually lose money, as will be the case for thousands of Irish farmers if prices fall below the cost of production?”

Murphy added that the Ornua PPI for October stands at 41c/L, "which is below the cost of production".

"Farmers are very legitimately asking how any processor can justify setting a milk price below this level," Murphy said. 

"The so-called strategy of simply passing back the reductions to farmers needs to stop and needs to stop now."

Lakeland Dairies was the first processor to announce its milk price for October supplies.

The board said it has agreed a price of 40.25c/L at 3.6% butterfat and 3.3% protein to be paid for October milk in the Republic of Ireland, which is inclusive of the 0.5c/L sustainability incentive payment.

This is a reduction of 4c/L on the price paid in September.