Depth of dairy slump is just sinking in
And he called this week for the €29m of bonuses paid to milk processors by Ornua to be distributed to cash-strapped dairy farmers.
Meanwhile, retailer sympathy for struggling dairy farmers across the EU has ended, with Lidl in Germany sparking a milk war by cutting the price of a litre of fresh whole milk from 59 to 49 cents.
One of Germany’s biggest supermarket chains, Lidl is believed to have signed contracts to buy milk from dairies for 27.5c per litre, which has been produced on the farm and processed into UHT milk in milk plants.
This wholesale product price is close to the current farmgate price for raw milk paid across the EU, and exceeds the price paid to farmers in many member states.
By way of explanation, Lebensmittel Zeitung, the leading trade and business paper of the consumer goods sector in Germany, has reported that “many dairies would rather sell more at lower prices than lose out on volume”.
Last autumn, Lidl bosses met the German Farmers’ Association, and agreed to refrain from price reductions, and Lidl even paid a bonus for milk.
Some competitors followed suit. However, they now believe this may have been counter-productive, depressing the dairy market even further because it led farmers to increase milk production.
Now, it is the turn of consumers in Germany’s population of 80m to benefit, from a 10c per litre price cut, while farmers in Germany say they are losing as much as 28c on every litre they produce.
Donal Denvir, in the Dusseldorf Office of Bord Bia, says the German retail food industry is pressing ahead with paying the lower prices to dairies in the branded fresh dairy sector, in spite of widespread farmer protests and political appeals.
Meanwhile, the European Commission has averted an escalation in the milk market slump by announcing that the standard intervention rate of €1,698 per tonne will be paid for skim milk powder purchased during the recent short tender period announced until normal intervention buying resumed with a new upper tonnage limit.
However, the commission’s scheme of voluntary, nationally-funded measures to compensate dairy farmers who cut milk production continues to founder, and agriculture MEPs have called for an EU-funded wider scheme.
ICMSA’s Gerald Quain said milk prices have been below cost of production for nearly a year, and dairy farmers’ cash-flow and income have been wiped out. He said price cuts are no longer possible, and further savings can only be sought within co-ops’ own resources and structures.
He said: “Farmers invested heavily on the back of a positive scenario pushed strongly by the Minister for Agriculture, Food and Marine and milk processors, and they now believe that they have been abandoned by the policymakers and left totally exposed to global markets that are rigged to work on behalf of the retail corporations and multinational PLCs.”
