‘Partnership and education' the response to milk price volatility
Partnership and education between dairy farmers, processors, and other industry stakeholders are needed to help mitigate the impact of milk price volatility, according to one analyst.
Liam Fenton, the global head of dairy for financial services company StoneX, said that ‘honesty in what is happening in the market” is what is needed.
“Farmers need tools to run farms as businesses, not casinos,” Fenton said.
He made the comments at the recent annual general meeting (AGM) of the Irish Creamery Milk Suppliers Association (ICMSA), where he also told the assembled dairy farmers that milk prices are likely to take an upward turn again in due course.
Milk prices
Fenton said: “I think milk prices will go up, it’s just a question of timing.
"We [StoneX] work very much with a lot of the buyers in the market, and we can see that they have been watching the milk supply coming down the road, and they have been holding back on buying.
“We see them now starting to come into the market,” Fenton added.
Despite some signs of positivity down the road, the StoneX analyst said the milk price volatility is a “major challenge” for farmers, especially younger ones.
"Milk price uncertainty is a major challenge for farmers... It’s the [farmer] who’s got borrowings, who’s got kids in school…so younger farmers with heavier borrowing are the most exposed,” he said.
“So no clarity on prices - who else invests in a situation, keeping calves, so in two years’ time, he has no clue what he’s going to get for his milk.
“He’s prepared to pay €500, or risk €500 , to keep a calf so that he can increase his herd, when he doesn’t know what he will be getting for milk in two years’ time.
"So I think this market uncertainty is a big challenge.”
While prices may rise again for dairy farmers eventually, the market analyst said that the volatility in prices will always be a feature.
“It is a challenge, I don’t want to cloud it. Milk price volatility is here to stay, and I think the industry must address this long-term volatility” Fenton said.
"Co-op CEOs, they can only pay what the market allows, you can kick them as much as you like, you can beat them up, but they are only going to pay what’s in the market.
“I think one of the things we need in this market is a little bit of honesty as well, as to where prices are coming... There was a feeling in the market that prices weren’t going to go down.”
According to Fenton, milk price management has existed in Ireland for over 10 years, and he believes that industry focus should "shift from the price to the margin.”
“This is what you should be looking at, the margin," he said
"A co-ordinated education programme I think is needed; honesty in what is really happening in the market, partnership, everybody working together.
“Farmers need tools to run farms as businesses, not casinos. It’s easy to go to the races if you want.
“I think prices will go up; I think we need honesty in the market; volatility is here to stay, but we can mitigate it, we can do something about it.
"Partnership and education is needed as the next step,” Fenton added.
