Milk debate getting cloudier
The seasonal battle between the milk co-ops and their suppliers is upon us again, with both sides keenly conscious that every cent per litre is crucial in the peak production months of May and June.
Most of the creameries have followed the cuts of 2.5cpl or more imposed in April with a similar cut in the May price per litre.
Glanbia has cut 2.5c off its price for May, bringing it down to 28.5cpl. By the time you’re reading this, it is widely expected that Dairygold will have followed that lead with a similar cut to the 31cpl it was paying farmers during April.
The West Cork co-ops of Bandon, Barryroe, Lisavaird and Drinagh are also likely to clip around 3cpl from their price per litre, having offered a very farmer-friendly 34cpl during April.
When the AGM season for the leading co-ops kicked off in the spring, Arrabawn was one of the first to announce a price cut and offer guidance on where it thought the price would be by the end of 2012.
In mid-April, Arrabawn cut 1.95c from its March price, bringing its price down to 32.5cpl. The co-op said at the time that it thought the price would fall to 28cpl by the end of this year.
Mind you, this view was expressed in a week when Fonterra and Northern Ireland auctions hit their lowest points in almost two years.
Arrabawn acted fast, conscious that this trend might follow curve similar to that of Titanic-like 2009, when the Irish co-ops hesitated with near fatal consequences, including 6cpl being clipped off the milk price in one swoop.
While conscious of not misrepresenting any of the co-ops, I think it’s fair to say that the others shared Arrabawn’s view of this. Dairygold, Lakeland and others have all offered frank and indepth projections and rationales for their milk price choices.
The co-ops are, at once, guardians of their members’ interests, while also being fully functioning businesses whose remit is to serve their shareholders. For some co-ops, this means a balancing act between milk price and dividends, though the distribution model varies somewhat between co-ops.
In every case, however, the co-op boards find themselves having to juggle the double-edged swords that are members’ mid-term expectations and the long term need for business security.
And so, every March and April, comes the critical debate on price, with each side either highlighting or discounting global market trends to fit their arguments.
As a relatively impartial observer, on the question of global trends, it seems odd to me that the co-ops were citing the downturn in global milk trends back in March as a justification for milk cuts, but are still driving on with cuts now despite Fonterra, Dutch and Northern Ireland dairy auctions all either stabilising or heading upwards in price.
Naturally, the IFA, ICMSA and other farmer groups have been quick to point out this clear contradiction. In the context of the Irish milk price, are overseas dairy auctions a red herring or are they a key indicator?
With the global dairy auctions being variously touted and/or discounted to serve the bias of each individual speaker, it does beg the question why it cannot be excluded to avoid any further clouding in the seasonal pre-summer milk price debate.
With the EU building a bypass around any talk of future market supports for the milk producer, the trust between Irish farmers and their co-ops will be mission critical from 2015 onwards. Surely talking around a cloud-free table would help.
