Weaker prices in 2015 are likely to incentivise more dairy farmers to opt for fixed price contracts in 2015, according to Minister for Agriculture Simon Coveney.
At the launch of Bord Bia’s Export Prospects and Performance report launch this morning, the Minister said that it has been very hard to get farmers to fix prices in the last couple of years due to record high milk prices.
He said hopefully one of the benefits of the downturn in prices this year, will be that farmers will look at new ways of hedging and ensuring against price volatility.
According to the Minister, when an industry is in the mist of the upside of price volatility there is an expectation that prices will remain high.
“If your getting over 40c/L for milk that has quality bonuses and so on, why would you be fixing 40% of your milk at 33-34c/L?
“Even thought that’s a price that people would love to have a fixed price contract on right now,” he said.
“It has been difficult to introduce fixed-price contracts at a time when milk prices have been sustained at an all-time-high for nearly three years.”
However, according to Minister Coveney the sector is in a new environment now.
“We will see an awful lot more farmers looking to fix a portion of their price milk into the future.”
The Minister also said that farmers own co-ops and so they make the decisions at board level, with some exceptions in Glanbia and Kerry Group.
“If farmers want to fix price then co-ops will facilitate that. If they don’t they won’t.”