Irish Farmers’ Association (IFA) Dairy Committee chairman, Stephen Arthur, insists that milk processors must pay a milk price that reflects the PPI and the Ornua Value Payment.

The Ornua PPI (Purchasing Price Index) for September is 121.8, or 36.6c/L inclusive of VAT. This is based on Ornua’s product purchase mix and assumed member processing costs of 7c/L and excluding member margin.

Ornua said that the increase in September, up from 118.1 in the previous month is “as a result of general stronger returns across the product range”.

When adjusted to include the Ornua Value Payment, this equates to 39.86c/L. Ornua Value Payment payable to members in the month is €9.66 million, which equated to 7.4% of gross purchases in the month (year to date 6.4%).

The IFA has said that in July, 2020 Ornua changed the way in which it reported the PPI. The PPI, it stated, is a measure of Ornua’s market performance on commodity products.

Therefore, the farm association said that it should only include base commodities.

Ornua Value Payment

According to the IFA, any market premium along with the members’ bonus would be expressed separately as the Ornua Value Payment. In addition to these changes, processing costs were revised upwards from 6.5c/L to 7.0c/L.

In a statement, the IFA states: “This revised payment structure is now in place for over a year. Compared to July (€3.2 million), August (€3.4 million) and September (€5.8 million) of 2020, the value of the Ornua Value Payment has tripled for July (€10.05 million) and August (€10.11 million) and almost doubled for September (€9.66 million) of this year.”

Arthur continued: “Milk processors continue to pay a price which is only reflective of the PPI without the Ornua Value Payment. Farmers are asking what are processors doing with this bonus and why aren’t they paying it back to them?”

Global commodity prices

On the global market, spot commodity prices across Europe have risen in the past week and averaged €4,277 for butter (+0.9%), €2,707 (*1.3%) for SMP and €983 (+1.3%) for whey.

The EU futures market is also rallying for the October 2021 to May 2022 period, with price increases in the past week of €4,431 (+4.3%) for butter, €2,775 (+1.8%) for SMP and €966 (+1.0%) for whey.

“Significant gains need to be made on milk price this month. When the market dips, processors are always quick to pull the price,” Arthur added

“Now that the market is buoyant, they must reflect the trade with a meaningful rise in milk price.”