IFA urges all other co-ops to follow Kerry’s lead and increase milk price

IFA national dairy committee chairman Kevin Kiersey has welcomed Kerry Group’s decision to pay farmers 38 cent per litre for all milk supplied in May.

Mr Kiersey said this move is a significant first step in Kerry living up to its commitment to pay “a leading milk price” for 2013. The co-op is to pay an extra 2.86c/l, bringing its price to 36.26c/l plus Vat, which amounts to 38c/l including Vat.

Mr Kiersey said Kerry’s move vindicates IFA’s argument that current market returns fully justified a major base price increase. He also urged all other co-ops to follow suit, by consolidating their April hardship bonuses into the base price, and then further increase the milk price by at least 2c/l for all milk produced from May.

A spokesman for Kerry said the price increase has also been well received by the co-op’s milk suppliers, offering them some relief following months of difficult weather. This price increase to suppliers is the company’s third increase in recent months.

“We had announced a review of the milk price in January and another in March,” said the spokesman. “We said in April we would review our milk price again for May once we had some insight into how the trade was developing.

“Once we had secured our near-term positions with our customers, we then reviewed the milk price as promised. We have increased our price by around 3c per litre to 38cpl (including Vat), and that payment will be made in the second week of this month.”

Meanwhile, Mr Kiersey said that market returns will continue at relatively high levels for the foreseeable future. He said the current global market price — standing at a gross 46c/l — comfortably justifies a significant milk price increase by all co-ops. He is calling on other Irish co-ops to follow Kerry’s example and increase their milk price.

“I am conscious of the fact that the Fonterra auction system has corrected historically high dairy commodity prices three times, the last time only yesterday with a 5.3% weighted average reduction,” Mr Kiersey said.

“However, the early June 2013 Fonterra prices remain 53% above a year ago. Also, a detailed analysis of this auction confirms the same trend as the previous two: low enough levels of trade for certain products and periods, and a gamble by buyers that ample New Zealand milk production in the new season will alter the supply/demand balance from autumn,” he said.

“While the announcement by Fonterra of an increased milk price to NZ$7/kg MS will undoubtedly send a strong message to New Zealand farmers, a good early season which can reverse the current tight global supply situation will require some major improvement in pasture conditions,” he added.