Calls for milk price rise and bonus for Limerick dairy farmers

THE ORNUA PPI for December has climbed to 135.5, an equivalent farm gate price of 41.6cpl (VAT incl), state the IFA.

When adjusted to include the Ornua Value Payment, worth €3.72m, the equivalent farm gate price is 45.6cpl, says dairy chair Stephen Arthur.

"Due to rising input costs, adverse weather and more restrictive environmental policies, global milk supply from the main exporting countries has been constrained despite a substantial increase in dairy commodity prices.

"This tightened supply is supporting the sustained rise in milk price we have seen for the past six months,” said Mr Arthur.

This week’s New Zealand GDT auctions also reported milk price increases in butter, SMP and cheddar cheese. However, the benefits to farmers of the increase in milk price have been significantly offset by the rise in input costs.

"Teagasc estimate that the average cost of production will increase by 13% in 2022, on top of a 9% increase in 2021. Combined, this will lead to a cost increase of circa 23% within two years and is expected to result in a decline in average incomes for dairy farmers this year.  

"Processors must pay a milk price well in excess of 40 cent per litre this month. Given the buoyant year processors have had and the rising costs farmers will have to incur this year, every board member has to seriously consider a 13th payment for its suppliers," concluded Mr Arthur.

Meanwhile, reviewing market returns throughout the 12 months of 2021 and the milk price paid to farmers, the newly elected chairperson of ICMSA’s dairy committee, Noel Murphy, said that significant returns from the market were achieved and milk processor boards must now look at paying an end-of-year bonus to milk suppliers to reward dairy farmers for their "huge contribution and to fully reflect the improved market returns from 2021".   

Mr Murphy, who has succeeded Limerick’s Ger Quain, said that close analytical tracking of the Ornua PPI through last year demonstrated conclusively that milk processors had "not always paid the base price in full and that was before any consideration of added value payment". He noted that the 2021 milk payment year will come to a close later this month and ICMSA is proposing a bonus that would bring the final 2021 milk price up to "actual market returns".  

To give some idea of the significance of the bonus ICMSA envisages, Mr Murphy estimated that the value-added payment would be worth almost €5,000 to every dairy farmer in the country if paid out on a flat division.

"Dairy markets showed considerable improvements throughout 2021 and clear evidence of this can be seen in the Ornua Index which increased by a hugely significant 24 basis points. The GDT rose by over 30% and the Dutch Dairy quotes rose by over 20cpl on both Butter/SMP and WMP.

"We are confident that Q1 of this year will see this trend consolidate. The increase in the farm gate price paid to farmers between December 2020 and November 2021 was approximately 7cpl, which was very a modest increase given the buoyancy of the market.  

"2022 will be a challenging year in terms of input costs and that increases the importance of milk price. The record shows that 2021 market returns were notably better than the actual milk price received by suppliers and that difference should now be returned as an end-of-year bonus to co-op milk suppliers,” said Mr Murphy.