Dairy co-ops will undermine farmers’ profitability and confidence if they over-react to global market cuts in the milk price, warns IFA national dairy chairman Kevin Kiersey.
The IFA dairy expert was responding to the results from New Zealand group Fonterra’s latest Global Dairy Trade auction, which saw an average fall in prices of 2.4%. Mr Kiersey said it was important to remember that Irish co-ops do not trade on that auction.
Mr Kiersey said he recognises the current pressure on dairy market returns, but still urged co-ops to adopt a measured response on milk prices over the peak period. He said that any knee-jerk response could undermine the ability of dairy farmers to invest for the post-2015 era.
Mr Kiersey said: “I have met with the main co-ops in the last few months, and all have made it clear to me that they were now far less dependent on basic commodities than they once were. Many have developed, through the IDB or alone, strong contracts with regular customers for high-value products, and these clearly provide more stable returns.
“Of course, even those contracts will not be totally immune from spot market pressures, but when you depend much less on spot or opportunistic trade for basic, undifferentiated commodities, such as those traded through the Fonterra auction, returns ought to be higher and less volatile.”
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