Real threat of supermarket milk supply shortage

“Milk produced over the winter months will soon fail to meet demand. There is a real risk of shortages for consumers, because farmers aren’t being paid enough to milk cows during the winter.”

That was the message from IFA President Joe Healy, as he launched the association’s Milk Wise 2025 strategy today, March 28.

Also Read: New liquid milk strategy set to be unveiled by the IFA

18,000 dairy farmers and 1,800 specialists

“90% of Ireland’s dairy farmers produce milk on a seasonal basis for commodities, mainly for export. Fresh milk for the supermarket shelf is produced 365 days a year by 1,800 specialists among our 18,000 dairy farmers,” he explained.

“Traditionally, there has been a price premium for farmers who milk all year round, but their margin has been eroded in recent years.”

The IFA President said that the pressures on supplies could be exacerbated by the Brexit process, so a strong strategy is needed to keep local produce that is valued by Irish consumers on supermarket shelves.

“Article 50 will be triggered tomorrow, which will start the formal process of Britain leaving the EU,” said Healy.

26% of milk on supermarket shelves comes from Northern Ireland.

“The IFA strategy identifies the challenges and provides solutions which can secure locally-produced, high-quality fresh produce year round – while nurturing this valuable €530m market.”

He added: “With our strong export growth no longer hampered by quotas, the amount of supermarket milk produced over the winter has dropped. Cover over consumption in the winter months has fallen from 11% in 2013 to 5% in 2014.”

IFA National Liquid Milk Chairman John Finn said, from a retail regulation point of view, it is time to put an end to the one-year tenders favoured by our main retailers. “These make for dysfunctional commercial relations and result in wild swings in supply arrangements, which neither farmers nor dairies can cope with,” he said.

I am challenging dairies and retailers to show greater creativity, and provide multi-annual fixed-price contracts – similar to those offered by co-ops for creamery milk destined for export.

“We also believe that our retail regulations need to be revised to return to the prohibition of below-cost selling, and to provide for a well-resourced and independent Ombudsman to stamp out unfair trading practices and secure a sustainable margin for primary producers,” he added.

“We propose to first establish a base-line through a profiling survey of the 1,800 specialist producers: their ages; their succession plans and their intentions.

“For example,” he said, “autumn dairy calf births fell 15% in 2015 and 11% in 2016.

It is clear that we have reached the point where shortages of fresh produce will occur in winter.

“The National Milk Agency (NMA) has already agreed with our proposal, and the survey is to be carried out this year. We also believe farmers’ contracts need to be reviewed to offer greater fairness and transparency in pricing, multi-annual commitments, and better visibility on winter prices before signature,” he said.

“We have made a number of recommendations regarding the specific regulation of liquid milk by the National Milk Agency. Most of these are already being progressed in co-operation with the NMA,” Finn added.

“We believe it must be empowered to collect and disseminate data on milk imports and must, together with Teagasc, develop and maintain an observatory of input costs. This must be a tool in fulfilling the NMA’s mission under the Milk Supply Act 1994 – to secure adequate compensation for farmers over the winter months.

“Current guidelines used for this assessment consider that, while the product is supplied, adequate compensation is duly paid. This does not anticipate the type of looming shortages we are seeing at the moment.

The assessment of ‘adequate compensation’ must be made on the basis of robust economic analysis of the profitability of production.

Finn added that President Joe Healy and he would present the strategy to the Minister for Agriculture, Michael Creed, later this week.