€30K income cut for typical dairy farmer
“That will result in a cash flow crisis on many farms, particularly for new entrants and those who expanded production significantly,” said TJ Flanagan, Dairy Policy Executive with ICOS, which represents the co-operative dairies.
Mr Flanagan noted that banks are reporting only a marginally higher overdraft utilisation by farmers compared to the same period last year, and said this demonstrates the degree to which farmers are utilising co-op credit to fund their feed, fertiliser and other input purchases.
“No other sector of society would be asked to cope with such dramatic swings in income, and strong measures are required,” said the ICOS official, who called on the Government to implement taxation measures which can help dairy farm families cope with income volatility.
He warned that milk prices may deteriorate further, with EU dairy commodity prices currently pointing to just over 20c per litre, but with the Irish product mix and investment in value added helping to maintain Irish milk prices 10-15% above those levels.
“The concern, though, will be that butter slips to intervention price levels, and we could be back in the price environment of 2009,” said Mr Flanagan.
Tuesday’s GlobalDairyTrade auction may have allayed such fears a little, with a 7.5% price rise for whole milk powder lifting prices 3.8% on average, but prices for skimmed milk powder gaining only 0.3%, and prices for cheddar cheese falling 3.9%.
The milk market slump is reflected by Ireland’s biggest milk buyer, Glanbia Ingredients Ireland (GII), cutting their February milk price by 2cpl, to 22 cpl including VAT for manufacturing milk at 3.6% fat and 3.3% protein.
However, 1cpl of support from Glanbia Co-op to its members, and the advance distribution by GII of a 1 cpl additional cash bonus from Ornua, bring the price to 24 cpl, compared to 25cpl in February (the Ornua 1cpl will be paid for all manufacturing milk supplied in March; it is part of the proceeds of the former Irish Dairy Board’s sale of a business in the US, announced in January).
Meanwhile, Glanbia Co-op has also announced a 25 cent per share special dividend to all members, worth over €1,000 to the average milk supplier shareholder.
Glanbia chairman Henry Corbally said that the Board and management of Glanbia are acutely conscious that the current weakness in dairy market returns, as well as the challenging weather, is extremely difficult for milk suppliers, and Glanbia are doing all they can to support them.
He said the Glanbia Co-op special dividend (share interest) is worth a total of €10.1 million to all Society shareholders, and will be paid by early May, in addition to the ordinary dividend (share interest) of 10 cent per share that will be proposed at the Society’s AGM in May.
IFA National Dairy Committee Chairman Sean O’Leary said Glanbia’s 2c/l milk price cut was a massive blow to their suppliers, already challenged by low milk prices and the cold and wet spring.
He said the 22c/l GII milk price is 1.7c/l less than the equivalent price they were paid by Ornua for dairy products in March.
The Kerry Group milk price is unchanged for March, but Lakeland, Dairygold and Aurivo have cut the milk price.
