Quarter of a billion litres of milk to be sold through fixed price schemes – Ornua

The guts of a quarter of a billion litres of milk will be sold through fixed price schemes this year, according to Ornua’s Bernard Condon.

Ornua’s Director of Dairy Trading and Ingredients said fixed priced milk will account for just under 10% of the total milk volume handled by the co-op owned company this year.

A number of dairy processors have moved to introduce such schemes, including Glanbia and Dairygold, with both schemes running for an 18-month time frame.

Speaking at the joint IFA and FCStone conference on dairy risk management, Condon said that Ornua is the primary party involved in most of the co-ops fixed milk price schemes.

“We have been involved with fixed milk price offerings since the inception in 2011,” he said.

He also said that a lot of the milk purchased under the fixed milk price schemes is used in the production of the companies Kerrygold butter brand, which is the top selling brand in Germany.

We have allocated a significant amount of the fixed milk product against the brand and that means we have a bankable product in good and bad years.

“We also allocate some of that fixed priced milk against long term ingredients contracts with blue chip customers,” he said.

Condon continued to say that using milk from the fixed price scheme in the Kerrygold brand is important, as it protects both the co-ops and farmers involved from a certain amount of market volatility, due to the strength of the brand in both Germany and the US.

“There is a protection in having as much product as possible in the brand to protect against volatility. About 33% of our total volume goes into the Kerrygold brand,” he said.

He also said that volatility has become a mainstay of the dairy market, increasing two-and-a-half fold since 2007.

This has been mainly caused by European policy changes and increased production from marginal areas such as the West Coast of America and the Victoria desert in Australia, he said.