ICMSA president John Comer wants the Government to match the EU’s €11m dairy aid package with equal funding.
He said this aid should be given direct to dairy farmers in an administratively simple fashion.
He described the proposal to create low-interest loans as a bank subsidy in disguise.
“The idea that funding to address a dairy crisis would be hijacked and effectively end up with the bank is just astonishing,” Mr Comer said.
“If the Government want to involve the banks in helping dairy farmers they could try convincing them to charge competitive rates.
“We cannot and should not use funding for farmers to subsidise banks that are now again making profits in the billions again.”
Mr Comer also criticised “the back-patting” that has followed some co-ops paying an extra 1.c per litre for July milk, saying dairy farmers continue to sell their milk at 3c to 3.5cpl below the cost of production.
He said the ICMSA’s €1,200 payment proposal is permissible under EU rules and would provide a level of support to dairy farmers during a very difficult time.
He said dairy farmers did not have access to the coupled supports available for suckler cows and sheep.
Meanwhile, global market analysts are predicting that dairy prices will gradually recover as milk output from the EU and China falls.
Rabobank analysts expect EU milk output to continue to recede, having fallen 1.5% in June. Whole milk powder prices rose 18.9% last week and are now 42% above the low they hit in February.
Michael Harvey, Rabobank senior dairy analyst, said: “There is no doubt prices have bottomed.
“There has been a supply response from many of the world’s largest dairy exporters.
“The missing piece was signs of a slowdown out of Europe, but in the last week or so EU production fell for the first time since April.”
European Commission data for May milk suggests a year-on-year increase of 0.8% in output — the slowest rate of increase since the EU removed quota restrictions at end of March last year.
Australia’s leading milk producer, Murray Goldburn, says the pace of EU milk output will remain “the key driver” for global milk prices.
He said the current “unrealistically low levels” of global milk prices will correct as EU output continues to stabilise.