Co-ops must share market returns with their suppliers
Processors and co-ops must consider a retrospective ‘top-up’ payment in lieu of their failure to pay 40c per litre for July milk — a price that is also equally justified. Co-ops and processors will simply have to stop dragging their feet in relation to milk price increases. Quite apart from the fact that this price is fully justified, farmers need every cent possible at this time to meet the bills and financial pressures that have built up over the last 12 months.
Co-op boards will have to insist that the full benefits of the buoyant marketplace are immediately passed back to their suppliers, and this means that a price of at least 40c per litre should be paid for August milk, with a retrospective payment for July representing the fact that they demonstrably should have paid 40 cents per litre for that month and inexcusably did not do so.
Any co-op that does not come up to that level is categorically not returning the benefits of the marketplace to their suppliers and, to date, we regret to note that co-ops and processors have been regrettably slow to pass on the increased returns. This just cannot continue.
A difference of 2c/l for an average supplier of 300,000 litres of quota would see him/her lose approximately €800 just for July milk. Farmers are at a loss as to how co-ops can be so short-sighted and stubborn about keeping their prices low when they have direct knowledge of the financial pressures on farms.
Given the IDB Index has shown consistent month-on-month rises, it would be sensible to expect milk prices to follow suit. The index is not a notional guide but is based on actual sales of Irish dairy products. In 2010, the base year for the IDB Index, the average milk price returned that year was 30.2 c/l. Given the index of 130.3 for July, milk prices from co-ops should be at least up to 40 c/l.
Those co-ops which have already set their milk price below this level — including GIIL, the largest milk processor in the country — should immediately review their decision and increase milk price to a level that reflects market returns. Co-ops have reviewed milk prices in the past — Glanbia did it in 2009 — and it needs to be done again.
The most recent superlevy position announced by the Department of Agriculture, Food & Marine is that the official milk quota position at the end of July 2013 was 1.44% under quota. While the country is still under quota, the gap continued to close during July and dairy farmers need to remain vigilant, given that a superlevy fine remains a distinct risk for the current quota year.
The statistics indicate a firm trend, At the end of May, the position was 4.64% under quota. By the end of June, that had fallen to 2.6% and now the July figure continues that trend.
The perfect weather conditions experienced in the first half of August are significant and the prospect of a superlevy is becoming a distinct possibility that could pose very serious difficulties for those individual farmers substantially over-quota.
The situation will vary depending on which co-op the farmer is supplying, and it is essential that suppliers who may be exposed consult on an ongoing basis with their processor and take every opportunity to increase quota coverage — including temporary leasing.
