ICMSA: Co-ops stretching farmer loyalty to limit

Farmers’ loyalty to their local co-ops is being severely tested by the widening gap between the best and worst prices offered for milk supplies, said ICMSA dairy chairman Ger Quain.

ICMSA’s analysis of comparative 2018 farm gate milk prices estimates a €12,000 annual difference for 350,000L suppliers to co-ops at the top and bottom of the milk price league. The analysis excludes a comparison of the various bonus payments being offered by the milk processors.

“This is a particular bone of contention for milk suppliers in Cork, where our members who supply Dairygold regularly look at prices being paid by the West Cork co-ops,” said Mr Quain.

“The Dairygold suppliers see that their neighbours are substantially better off than them. All of the co-ops all supplying into Ornua, so no co-op should be paying below the Ornua price index, which is around the 32c per-litre mark.”

Dairygold paid its suppliers 32.15cpl for January milk. Drinagh Co-op, one of the four West Cork co-ops feeding into Carbery, paid 34.53cpl for January milk.

Glanbia (31.5cpl) and Lakeland (32cpl) are the first two co-ops to announce their February milk prices. These prices include the Vat and lactose bonus. Farmers will note that Glanbia’s February price is 0.5cpl down on their January price.

Like-for-like milk price comparisons can be problematic, due to variations between the co-ops’ quality and lactose bonuses and milk supply agreements.

For instance, Drinagh’s latest newsletter notes that the average milk price for January was 38.07cpl, based on 4.19% average butterfat and protein of 3.44%, including SCC bonus and VAT.

Mr Quain says the basic milk price gives farmers a reasonable comparison. In 2018, the top co-ops were paying over 32cpl, with the bottom co-ops on 30-31cpl.

That differential adds up to an estimated €12,000 income hit for farmers who supply co-ops in the lower end of the price league.

“While there are different baskets in each co-op, they should all be able to match the Ornua Index,” said Mr Quain. “The milk supply agreements are like gentlemen’s agreements. It’s hard for farmers to move from one co-op to another, but you’d imagine if these milk price gaps continue to widen, then that’s the way farmers will be thinking.”

Mr Quain said that there was more good news from the southern hemisphere countries this week, with the GDT increasing by 3.3%, which is a seventh straight increase in the index. This follows last week’s announcement from Fonterra that the milk price is to rise by 5% for the season.

Dutch spot prices continue their strong start to the year with WMP reaching 34.5cpl (farm gate equivalent) for the first time in almost two years while butter price continues strong even though prices are slipping from their historical highs. SMP continues to perform well after the sale of intervention stocks and together with butter remains over 32cpl.

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