'Angry' milk suppliers on the verge of protesting Dairygold's fixed-price contract
Dairygold fixed-price suppliers say they are looking for an extra 12 cents per litre to cover significant increases to farm input costs.
Dairygold's fixed-price milk suppliers are on the verge of protest as the processor says its hands are tied over aid for farmers tied into milk prices almost 20 cent per litre below the current base price.
Dairygold fixed-price suppliers say they are looking for an extra 12 cents per litre to cover significant increases to farm input costs over the last two years.
Speaking ahead of a meeting, which took place last night in Ballincollig regarding fixed-price contracts and sectoral targets, organisers told the that unless help was offered they would soon resort to protests outside processing plants.
Banks, processors, and advisors encouraged dairy farmers to sign up to fixed-price contracts to lessen the impact of price volatility.
However, the contracts only allowed suppliers to tie in the price they receive for their milk, but not their input costs meaning many have now been caught paying today’s inflated prices for their feed, fertiliser and energy, while receiving pre-pandemic prices for what they produce.
With virtually all Irish dairy processors offering the contracts, it’s an issue affecting thousands of farmers across the sector.
Last week, the Irish Examiner revealed that just two out of the Ornua’s eight member processors had accepted its offer for help, unhappy with some of the conditions attached to the money. This week, Minister McConalogue told the Dáil the matter was not within his remit and declined calls to offer any assistance to struggling suppliers.
Around 350 Dairygold suppliers are understood to be on fixed-price contracts, with those affected having between 10% and 20% of their milk tied up at 31.75 cent per litre and 32.25 cent per litre. By way of comparison, the most recent base price is 50.23 cent per litre for May’s milk.
Speaking to the , Alan Jagoe, a dairy farmer milking around 250 cows on his family farm in Carrigaline, Cork, said there was “palpable anger” among farmers affected. “There is pure frustration. Every other processor has done something for their fixed-price suppliers.”
Mr Jagoe explained that Dairygold suppliers entered these contracts in January and February 2020 when fertiliser was a third of what it was now and feed was €200 a tonne cheaper.
“Even diesel and electric costs have significantly increased since then,” he said. “I’ve only heard one farmer saying he wants to go back to the full amount – to get the current market value for his milk.
Processors argue that the milk has already been sold and prices have already been agreed with their customers. However, Mr Jagoe said the unprecedented global circumstances meant it was time to go back and renegotiate the deals.
“If you look at any other industry, there are contracts being broken in every sector at the moment. If you were building a house, the builder will come back and say they can’t build it for that price anymore but as farmers, we can’t seem to do that.
“We are not looking for other dairy farmers to carry us. We are looking for Dairygold or Ornua to go back to the customer and ask for the price to be adjusted to reflect those extra costs.
“We are only looking for the extra cost of the production of that milk, not the full 55 cent a litre of its current market value.”
Earlier this month, Dairygold wrote to suppliers on the contracts to say it could currently not offer any support to those affected as it “cannot be seen to favour milk suppliers in Fixed Milk Price schemes to the detriment of non-fixed-milk price suppliers.” However, it added that it was still “seeking to find a resolution”.
The letter signed by John O’Gorman, chairman of the board, and Conor Galvin, chief executive, said the firm was “disappointed” by the offer made by Ornua.
The letter explained that Ornua’s offer of 10 cent per litre aid for fixed-price milk would require farmers to commit to supplying the same volume in 2023 for 42 cent per litre.
“The 2022 dairy market and general economic environment has seen unprecedented inflation. This has driven significant increases in input costs, including fertiliser, energy and fuel. Thankfully, dairy market returns are going to be very resilient and are returning a very strong variable farm gate milk price," the letter read.
“We believe that a milk price in 2023 of greater than 42 cent per litre would see Ornua recoup all, or at a minimum, a significant proportion of the support offered for the 2022 volumes.
"As Ornua is only prepared to offer this minimal cash flow support, Dairygold has notified Ornua that it will not be accepting this offer.”
