The latest Ornua Purchase Price Index (PPI) has continued the downward trend seen in recent months, with the figure for this month being announced today (Tuesday, May 9).
The PPI for the month of April is 126.7, down from 136.8 for March.
Estimated member co-operative processing costs of 7.7c/L (excluding any allowance for processor margins) for the Ornua product portfolio implies a return price of 37.6c/L including VAT.
This is down from the 41.1c/L price reflected in last month’s index figure.
The energy cost element of co-op processing costs is variable month-on-month and changes depending on energy costs.
Ornua also announced that the value payment to member co-ops for the month of April is €7.1 million, which equates to 5.1% of gross purchases in the month (2.9% year-to-date).
The latest decrease is, according to Ornua, due to continuing weaker market returns, which have been a trend for the past several months.
The news of the latest drop in the Ornua PPI is further challenging news for the dairy sector, following the move by the major retailers in the country to cut consumer prices for milk and butter products.
In recent weeks, Lidl, Tesco, SuperValu and Aldi have all announced reductions in the retail prices of milk and butter products for consumers.
The move has led to concerns among farming organisations about the potential impact on dairy farmers who are already dealing with milk price cuts over recent months, along with high input costs.
One farm organisation has warned co-ops “not to even consider” passing retailer price cuts onto farmers.
The Irish Creamery Milk Suppliers’ Association (ICMSA) said that this year could turn into a “perfect storm” for dairy farmers where input costs surpass the price of milk.
According to the ICMSA Dairy Committee chairperson, Noel Murphy, the situation could leave farmers supplying milk below the cost of production over the peak months.
He said that co-ops need to take a stand for their farmer members and resist any pressure from retailers to further cut milk price for suppliers.