No merry Christmas for Limerick dairy farmers as milk prices continue to plummet

THE CHAIRPERSON of ICMSA’s Dairy Committee, Noel Murphy, describes the latest milk price reductions as “horrendous”.

Dairygold announced this Tuesday that they were reducing the October quoted milk price by 3.25cpl to 38cpl. It follows Kerry Dairy Ireland who decreased its October milk price by 3.53 cent to 41cpl.

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Mr Murphy said that attributing the precipitous fall in milk price to a simple oversupply relative to demand was to ignore what he said was “actually a much more fundamental problem with the existing dairy pricing system”.  

Mr Murphy said that the recent history of milk price “boom and busts” demonstrated a “primitive market that protected every other component in the market through the expedient of loading all the risk onto the farmer-producers”.  

“It’s hugely important that we all see clearly what’s happening here. This isn’t any kind of ‘invisible hand of the market’ at work; what’s happened here is that the other components of the dairy markets knowingly use farmer milk price as a ‘reset button’ for dairy product price movements.  

“They do that in the full knowledge that reducing milk price leaves them untouched. It’s really important to emphasise: no-one else’s margins or incomes fall are affected when we get the kind of price collapse we are seeing now. They all protect their own position in the knowledge that our reduced milk price and wiped income is effectively the ‘reset’ button for the whole cycle to start again.”

Mr Murphy said that everybody understands that dairy markets have weakened in recent months with little warning.

“Farmers understand this but we are questioning – and have every right to question – where all the processors’ ‘forward sold’ contracts at defined prices have gone?  These are always cited when prices are rising but are nowhere to be seen when the markets fall.  

“The markets suddenly weakens and ‘Bang!’, the farmer takes the hit straight away. This is an absolutely primitive way of managing a sector, it’s utterly destructive and it’s simply unsustainable for the family dairy farm to be the only ones left ‘holding the baby’ when the markets fall,” he said.

By way of context, Mr Murphy said that the farmer milk price reductions over the last two months would represent a loss of €32,000 if applied to a full year for a 400,000-litre milk supplier.  

“Who else is expected to just take an income ‘hit’ like that? Is there any other sector where people are just expected to do the same work and actually lose money, as will be the case for thousands of Irish farmers if prices fall below the cost of production?”

Mr Murphy concluded by noting that the Ornua PPI for October stands at 41 cents per litre which is below the cost of production, with an additional value-added payment of €6.3m. He said that farmers are very legitimately asking how “any processor can justify setting a milk price below this level”.  

“The so-called strategy of simply passing back the reductions to farmers needs to stop and needs to stop now,” he concluded.