Storm brewing in Ornua amid mooted changes to PPI

Proposed changes to the Ornua Purchase Price Index (PPI) look set to become a bone of contention between dairy farmers and processors.

According to Ornua, the PPI is “a monthly indicator of market returns on dairy products purchased by Ornua [typically butter, cheese, whole milk powder and protein products], relative to comparable returns generated in a base year [2010]”.

Member co-ops of the dairy exporter are looking to increase the assumed processing cost of milk to be taken into account by the index, which is currently fixed at 6.5c/L.

It is understood that processors feel the current assumed processing cost does not adequately reflect the costs of processing and the investment in stainless steel in recent years.

An increase in assumed costs would consequently lower subsequent PPI monthly indices, and indicate a lower milk price at farm level.

A rise – and the extent of such a rise if one emerges – is at the centre of talks between board members at present and over the coming months.

May PPI

The most recent PPI was announced last Wednesday, June 4, with an increase revealed for June.

The PPI index for the month is 101.1 – which is up from the 99.8 (converting to 29.4c/L) in the previous month.

The May index converts to 29.9c/L, including VAT, based on Ornua’s product purchase mix and assumed costs of 6.5c/L.

A spokesperson for the Irish dairy exporter explained that the increase is due to higher powder returns coupled with stable cheese and butter returns.