ICMSA deputy president, Pat McCormack has called on the Department of Agriculture to issue its final national fleximilk figures for the dairy processors to begin paying back up to €10m to farmers in monies withheld due to superlevy concerns.
He estimates that the co-ops have withheld anything up to €20m from farmers’ milk cheques to cover superlevy fines which are now expected to total around €10m nationally.
The Irish dairy sector had expected to pay superlevy fines of around €15m when department figures had predicted earlier this year Ireland would finish 0.9% over quota.
The department’s latest figures estimated this over-production at closer to 0.65%. The milk processors will only begin to give back the extra €10m it has withheld from farmers to cover anticipated superlevy fines once the department finalises its fleximilk figures.
“That money needs to be passed back to the farmers,” said Mr McCormack. “They have held back more than necessary. The department needs to give its full and final national fleximilk figures. We’re three months waiting for those figures.
“We know that the co-ops will pay around 0.5% interest per month for this withheld money, but this compares poorly versus the 1.5% monthly interest which farmers are paying in stores. The department needs to get those figures out urgently.”
Meanwhile, the ICMSA dairy chairman welcomed the decision by most of the major co-ops to hold their June milk price at 37 cents per litre, with Tipperary Co-op settling on 37.5 cents per litre. Dairygold, Kerry, Aurivo and Lakelands are now all paying 37c/l, while Town of Monaghan has reduced its price by 1.5c/l to pay 36.5c/l for June milk.
Several of these co-ops had already reduced their May milk price, which met an angry response from the farmer organisations.
Mr McCormack described that price range as a fair reflection of dairy markets at this time when dairy markets are performing robustly despite strong growth in global dairy supplies.
He said: “From a dairy farmer perspective, this is encouraging and in terms of long-term perspective, the growth in demand in dairy products is very positive and has been shown to be sustainable at current prices, which is important given the growth in the cost of inputs over time.
“The growth in input costs is a huge concern for dairy farmers and clearly highlights the fact that milk prices will have to keep pace with input costs if dairy farmers are to earn sustainable incomes going forward.
“The decision to stay at 37c per litre would be worth around €500 to the average farmer for June milk,” added Mr McCormack. “We were very disappointed that the May price was pulled so quickly by the processors.”
Mr McCormack cautioned dairy farmers to take heed of the likely impacts on their profitability coming from the global surge in milk output, which has risen 4.9% from January to May. The US accounts for only about 1% of this increase, and the US herd has about 500,000 extra cows on hand compared to this time last year, suggesting further downward price pressure from the likely future surge in US output.
“We would advise farmers to err on the side of caution, given the likely volatility that this implies, coupled with the grain price reduction,” said Mr McCormack. “There will be volatility in the short to medium term. The increasing level of milk production around the world will add to the pressure that will come with the abolition of quotas in Europe.
“Rabobank are predicting a reduction in global supplies as the year progresses and dairy farmers will be hoping that the relative price stability — possibly even some of the improvements/recoveries we saw in May and June — will be sustained for the rest of the year so that dairy farmers can enter 2015 in a relatively strong position and meet their investment costs where they are expanding and taking on the substantial debt that involves.”
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