Minister McConalogue has stated that he is aware that the “unprecedented” increase in input costs is creating “particular difficulties” for dairy farmers who have a “significant” share of their milk supply locked into fixed-price contracts currently.
That is what he told Aindrias Moynihan, who last week, asked the minister about dairy farmers, who “find themselves locked into fixed-priced milk contracts in view of the ever-increasing production costs in the industry”.
The minister stressed that the nature of all markets, particularly in export-dependent sectors such as dairy, is that prices will fluctuate.
He noted that curtailed global supply and sustained demand for dairy ingredients have now meant that market prices are “remaining positive”.
Fixed-price milk contracts
“However, I am acutely aware of the pressures that farmers are under at present, arising from rapid increases in input costs,” he told the TD.
He noted that fixed-price contracts are a commercial decision between dairy co-ops and their suppliers. Indeed, he said, they can be an appropriate risk management tool for suppliers to “guard” against times of high volatility in milk prices.
Furthermore, the minister said that he is “pleased” to see the recent move from many of the country’s dairy co-ops.
Some have responded by increasing the price they pay to farmers on existing fixed milk price contracts with an additional supplementary payment in response to increasing production costs.
He told the Cork North-West representative: “I emphasise that it is not within my remit as Minister for Agriculture, Food and the Marine to intervene in commercial arrangements between supplier and purchasers.”
“I am also aware that contractual arrangements will exist at other points of the supply chain,” he told the Fianna Fáil TD.
“However, I will continue to engage closely with the sector as we work together on the significant challenges arising from the illegal invasion of Ukraine.”
He confirmed that the DAFM will continue to monitor the market situation for dairy and other agri-food commodities.