Kerry Agribusiness is examining options to help milk suppliers on fixed price schemes who are “overly exposed” due to rising input costs.
General manager of the division of Kerry Group, James O’Connell told a meeting in Tralee last night (February 2) that such schemes “have taken a bashing” in recent times but admitted that “some of it may be justified”.
One farmer told the event, organised by the Kerry Irish Farmers’ Association (IFA) Dairy Chair Michael O’Dowd, that he believed “some people will pay dearly” for going into fixed price schemes.
O’Connell explained that some suppliers had “locked in” at prices of 33.2c/L or 33.3c/L early last year when the outlook for the dairy sector was uncertain.
Kerry Group’s base price for milk supplied in December was 39.25c/L, including VAT at constituents of 3.3% protein and 3.6% butterfat.
Kerry suppliers
O’Connell said that he wanted to clarify that the company does not gain “a cent” if commodity markets rise when suppliers are locked into forward price schemes.
“When we lock in with the farmer, we lock in our price with the customer or on the futures market. Whether the market goes up or down after that we don’t gain or lose,” he stated.
Less than 10% of the total Kerry Group milk volume is locked into forward price schemes with suppliers for 2022, the meeting heard.
The company is currently looking at these schemes “on an individual supplier level” to see how much volume has been committed and the weighted average price the supplier will get for their milk which is “locked in”.
“We will work with individual suppliers that may be overly exposed on forward price schemes. We will not see them stuck,” O’Connell commented.
He added that Kerry will be “fair” to suppliers involved and will devise a mechanism for those needing help in buying farm inputs in the next week to 10 days.
One farmer asked whether Kerry Group will follow Glanbia Ireland’s move to offer some of its suppliers in fixed milk price schemes a 5c/L input support payment.
O’Connell said that was “one of the options on the table” but added that all measures were being considered.