According to the IFA, Irish dairy processors must deliver a farmgate price of 36c/L (including VAT) for May supplies.
Its dairy chairman, Stephen Arthur, has warned co-ops that farmers will not tolerate being short-changed on their May milk cheque.
“May is the peak month for milk production, and the markets are very strong at the moment. However, our analysis of international dairy markets confirms that Irish farmgate milk prices do not reflect the buoyancy in dairy markets,” he said.
“Co-ops have a duty to their farmer suppliers. Therefore, any attempt to hoard market returns to shore up their balance sheets will be strongly opposed,” he said.
“Irish dairy processors are not returning the milk price in the marketplace. As a result, there is an unacceptable gap between the market and what farmers are being paid,” he said.
Commodity market returns have yielded consistently high prices for the past three months, yet the farm gate price “has not kept pace”.
There was a 2 cent/litre differential between the Ornua PPI and the average farm gate price for April.
IFA analysis comparing April 2020 with April 2021 demonstrated price gains across three main market indicators.
- The New Zealand Global Dairy Trade (GDT) index is up 41%;
- the EU Milk Market Observatory (MMO) mix of butter and skim milk powder is up 30%;
- The Ornua Purchasing Price Index (PPI) (including the Ornua Value Payment) is up 25%.
Soaring production costs
In the same period, the farmgate milk price has only risen by 10%.
The latest Ornua PPI for May has returned a milk price of 37c/L (including the Ornua Value Payment).
“Processors need to step up to the mark and pay a fair milk price to their farmers. When the markets are strong, we want the full return. Our input costs have soared. We have to make a return on our investments like any other business,” Arthur added.
Fertiliser prices have jumped 30% in the past year. Meanwhile, feed prices have risen 12% and green diesel by 43%. “Processors have to deliver a milk price of 36cpl for May. There is no justification for anything less,” he concluded.