Just two member co-ops accept Ornua's offer of help for fixed milk price suppliers
"We strongly believe that it is incumbent on everybody to step up and support these hardship cases,” Ornua's chief executive John Jordan said.
Just two of Ornua’s member co-ops have accepted an offer of support to help farmers who are experiencing “hardship” as a result of fixed milk price schemes.
Ornua's member co-ops include Aurivo; Arrabawn; Carbery; Dairygold; Glanbia; Lakeland Dairies; North Cork Creameries; and Tipperary Co-op.
Ornua’s chief executive John Jordan told the Oireachtas joint committee on agriculture, food and the marine that it offered the same scheme to all of its eight co-op members who are its primary shareholders and supply product to it.
Mr Jordan acknowledged the “financial stress, and indeed mental strain” being experienced by a number of farmers and farm families due to the fixed milk price arrangements they have in place with co-ops, given the “unprecedented and unexpected rise in input costs in 2022”.
“While we are not involved in managing these schemes, we strongly believe that it is incumbent on everybody to step up and support these hardship cases,” he added.
“To this end, Ornua has offered a flexible programme to our members to enable them to target such cases amongst their own farmer supply-base in whatever way they see fit.
“Ornua’s fixed-price contracts with its members are for an agreed volume of product [butter, cheese or powders] purchased at an agreed fixed price.
“This is intended as an option for member co-ops and a potential contribution to addressing the difficulties that have arisen.”Â
However, Mr Jordan said that this “is not, and was never intended, to be a full solution to bridge the price between fixed and prevailing milk prices for all of the Irish dairy sector”.
“The Ornua offer is based on an assumption that 10% of the volume of purchases on a fixed price basis is from milk supplied by farmers in hardship,” he explained.
“Therefore, Ornua’s offer is a price increase of an average of circa €1,000 per MT, on 10% of product purchased from the member co-op in 2022.
“This offer can be managed by the co-op in whatever manner they deem most appropriate for their situation.
“It would equate to 10c/L on 10% of the volume or 1c/L on all of their volume."
He explained Ornua’s offer of support is being funded by Ornua, and is “entirely separate to the payment supports recently brought in by individual dairy processors”.
“Some member co-ops have taken up the offer and others have chosen not to," he added.
However, the support is not without caveats.
“There is a link to 2023, in that the volume and price are, in turn, fixed for 2023 at the same increased return," Mr Jordan added.
He told the committee that not all members will avail of the offer, "yet all farmers will ultimately be implicated - the cost of Ornua’s offer will impact Ornua’s annual result and the overall amount of Ornua’s 2022 Value Payment".
In response to queries from the , Arrabawn said it decided not to avail of the option offered by Ornua “as we dealt with the support for our farmers with fixed milk price contracts internally”.
“We felt that was the best option for the co-op and the farmers involved. We have provided up to 6.5c/L for all milk on fmp contracts for our farmers,” a spokesperson said.
Meanwhile, a Lakeland Dairies spokesperson said that the co-op continues “to negotiate with customers in relation to these contracts”.
In May, the co-op announced it was adjusting the milk price it pays on existing fixed contracts, with all fixed milk volumes in the Republic of Ireland receiving an 8c/L supplementary payment from April to December 2022 inclusive.
In Northern Ireland, the corresponding payment is 7p/L.
Glanbia, who has previously also brought in measures to support farmers with fixed milk, said that it is in “active discussions” with Ornua “to identify ways that they can assist our efforts to support farmers in fixed milk price schemes”.Â
These discussions are ongoing, a spokesperson said.
Tipperary Co-op does not offer fixed milk price contracts and is, therefore, not part of these discussions, a spokesperson confirmed.
Noel Murphy, chairman of the Irish Creamery Milk Supplers’ Association dairy committee said that it would have been expected that co-ops would have taken up the offer Ornua put on the table, but that having any conditions attached is "a big issue".
He told the that due to the experience of those in fixed price schemes, it is unlikely going forward that “you see farmers sign up in substantial numbers after the bad taste it has left in their mouth”.
“We’ve advocated that there would be a clause in the contracts where if input costs go up, the fixed price would have to go up as well in line with that. But of course, the downside with that is if the costs come down, your prices have to come down as well,” he added.
Chairman of the Oireachtas agriculture committee Jackie Cahill urged Ornua to "come up with a package that will allow an extra payment" to struggling farmers.Â
Mr Jordan explained that not all of Ornua's members offer a fixed milk price scheme to their farmer suppliers, while others reportedly have only a small proportion of their farmers in such schemes, and an even smaller number of hardship cases.
He said that Ornua is not involved in the operation of any fixed milk price schemes for farmers, or in setting the structure or parameters of these schemes. Ornua is also not its member co-ops’ sole customer for fixed product price contracts.
“Our involvement is to provide a bridge to manage volatility and hedge uncertainty for our customers, our business and our suppliers – that is our member co-ops. Those co-ops, in turn, may or may not offer fixed milk price contracts to their farmers," he said.
