Farming organisations heavily criticise supermarkets dropping milk prices

Following price cuts from major retailers on their milk prices, farming organisations fear a price war at the expense of Irish farmers.

Although framed to benefit consumers, Irish dairy farmers supplying Irish supermarkets are becoming concerned about the price cuts.

Farm organisations have accused Ireland's supermarkets of cutting prices to farmers in order to fuel a PR campaign to lure shoppers.

It follows the move by the five major grocery chains to cut milk prices on their products. Lidl was the first retailer to drop prices across a range of 12 milk products, with a 2-litre carton of milk dropping from €2.45 to €2.35. Aldi was quick to follow suit, confirming a reduction of retail prices on its own Clonbawn milk range effective from October 12. 

Both retailers have said the cuts are an effort to protect and benefit their customers from the current cost-of-living crisis. Other Irish retailers have followed, also dropping their milk product pricing on the shelves.

Although framed to benefit retail customers, farming organisations have heavily criticised the price drop. The Irish Farmers Association (IFA) President, Francie Gorman, has warned that although prices look good for customers, they should be wary of the potential consequences of retail price wars.

He said that a small cohort of Irish farmers has signed year-round contracts to produce liquid milk for these retailers. These farmers, in turn, endure higher production costs to ensure a milk supply is coming from their farms 365 days of the year, receiving a “modest premium over the price for manufacturing milk” to cover the costs of their extra commitments.

The number of fresh milk producers has fallen by 34% in the past 10 years and now stands at approximately 1,200 suppliers. The IFA President has said these farmers will be very concerned to see fresh milk price cuts being promoted by retailers.

“The real fear here is that this will be the start of a PR campaign by retailers where they use price cuts on a small number of fresh food items to attract customers into their stores to buy other products with much higher margins,” he said.

IFA Liquid Milk Chair, Henry Dunne, said: “A price war would threaten the viability of a very vulnerable sector. We would ask consumers to prioritise the purchase of farmer/co-op owned milk brands… These kinds of price cuts might make for good headlines, but they could have long-term consequences for the viability of our fresh milk farmers.” 

The IFA President said he wanted to make it clear that IFA will not stand by and allow retailers to engage in a price war using food items to gather headlines.

Following the announced reductions, the Irish Creamery Milk Suppliers Association (ICMSA) President, Mr Drennan, said dairy farmers are the ones suffering the losses or having their margins affected.

“When the markets are going up, every element of the supply chain makes its margins. When the markets are going down – as at present – the only element in the dairy supply chain that loses financially is the dairy farmers,” he told the Irish Examiner.

"There’s no other sector that can and does experience this kind of precipitous fall in income, and it’s exactly this kind of income volatility that is cited by the next generation as the single biggest obstacle to them going into farming. The Government had a chance to incorporate a measure to deal with it last week in the Budget, but yet again, decided to ignore the problem.” 

The ICMSA President said that farmers’ margins were an ‘open book’ in comparison to the retailers, calling them “a much murkier matter” and requesting that Minister Heydon give the Agri Food Regulator the necessary powers to publicly state “who is getting what and for what.”