The Irish Creamery Milk Suppliers’ Association (ICMSA) has called for an independently verified breakdown of the processor cost element of the Ornua Purchase Price Index (PPI).
This week, Ornua announced its purchase price index (PPI) figure for the month of February, which is based on a new methodology for determining estimated processor costs, which came into effect on March 1.
The Ornua PPI for February 2024 is 131.5, over six points higher than the figure for January, which was 125.1.
The latest PPI implies an indicative return on milk of 37.3c/L, inclusive of VAT, which is an increase of 0.2c/L on the 37.1c/L indicative return for January.
The figure is based on a member co-operatives’ processing cost of 9.4c/L, up 2c/L from 7.5c/L for the previous month, and a similar increase on the estimated processing cost which has been used in recent PPIs, in which the processing cost element generally hovered around 7.5c/L.
The processing cost figure is about 1c/L higher than that used for the same month last year, which was 8.5c/L.
The ICMSA’s Dairy Committee chairperson, Noel Murphy, claimed that “there is a huge anger among dairy farmers” in relation to the change, and called on Ornua to provide the complete data behind such an increase.
“Farmers find it extraordinary that processing costs can increase by so much – 25% – at a time when energy costs, a very significant element of the cost, have seen significant reductions for over six months.
“The reality of the pressures facing farmers seems to be lost on Ornua… The 22% reduction in January milk supply should be a wake-up call for Ornua and processors that all is not well on the farm,” Murphy said.
“To introduce such a change at a time when farmers are under enormous pressure due to weather, costs, low milk prices, and the ongoing negative impact of changes to the nitrates regulations shows a frankly alarming disconnect between Ornua and the dairy farmers producing the milk,” he added.
The ICMSA representative said that the association is calling on Ornua to publish the full data, the method of collecting the data, and to confirm whether the data was independently reviewed and verified.
“Farmer-suppliers to Ornua deserve a much better explanation than just a perfunctory email informing the press of the change.”
“We are going to insist that farmers get the detailed data behind this decision and independent confirmation that it is correct. It is no longer acceptable to just throw out a figure with no explanation which potentially will cost dairy farmers millions in 2024,” Murphy said.
He added: “Frankly ICMSA does not believe that the processing cost being used is reflective of the actual cost of processing today.”