The reaction of Glanbia’s suppliers to the recent 2c/L cut in its base milk price for November would be anger and confusion, according to a spokesperson for a milk suppliers’ lobby group.
The chairperson of the Irish Creamery Milk Suppliers’ Association’s (ICMSA’s) Dairy Committee, Gerald Quain, has said that the announcement was “completely unexpected”.
He outlined that key indicators signalled that global milk supplies were easing back and analysts began to get a clearer picture of where the supply-demand dynamic was likely to settle.
Global milk production has only grown by 1.4% in 2018 to the end of October, with a similar figure for the EU.
“As a matter of fact, the October supply in the EU declined year-on-year and it is not expected to grow substantially in the coming months.
“Put that very modest growth in supply against the increased volumes and prices of Skimmed Milk Powder (SMP) that has left intervention in the last month – over 60,000t in the last tender – and any reasonable analysis points to a positive market.”
Quain said that this is the “undeniable background” to the latest Glanbia cut to base price. “It’s just not justified and their suppliers have every right to feel irritation and frustration.
I have no idea why Glanbia indulge in this practice of cutting base price and then returning it as top-ups, as if it was somehow out of the goodness of their heart.
“They’re certainly not fooling their suppliers who have indicated to us repeatedly that they don’t want to be recipients of Glanbia’s charity or to be paid ‘top-ups’ with their own money out of the co-op.”
Quain explained: “We don’t accept this model at all and repeat the point we’ve made on several occasions – if Glanbia want to pay a bonus or discretionary payment, then they should pay it on top of the minimum market price; and that is the Ornua Purchase Price Index (PPI).”
Concluding, Quain added: “Cutting the base and then adding it back as a discretionary payment doesn’t fool anyone – certainly not their suppliers.”