ICMSA: retailers running dairy ‘casino’

ICMSA President John Comer has accused Irish retailers of running “casino rules” on dairy margins, operating a “house always wins” policy in relation to market volatility.

Taking January 2012 as the base index, ICMSA’s analysis of CSO data shows milk prices paid to farmers have fluctuated by 39 basis points during the past three years, while consumers have only seen a 13-point swing in the retail price of cheese.

Milk prices paid to farmers have fluctuated from 76 to 115 base points — 39 points. 

Taking the January 2012 milk price as 100 points, sample milk prices include 79 points in July 2012, 111 in January 2014, 96 in July 2014, and 76 in June 2015. By contrast, butter fluctuated from 94 to 101, Cheese 95 to 108 and full fat milk from 97 to 106 over the past three years.

“This shows that milk prices paid to farmers were three times more volatile than the retail price volatility of cheese. Farmer milk price is by far the most volatile item,” said Mr Comer.

“The retail market has been effectively ‘bricked off’ from the volatile market forces with which their farmer-suppliers have to contend each day,” he said.

The ICMSA leader also rejected any retail view that outlets need stable pricing to attract customers.

“The figures show that whether the background dairy prices were up or down, the retailers were always ‘up’ because of the way they had been allowed insulate their margins from any underlying market volatility,” he said.

“As a food exporting nation we constantly hear the argument that our food production is at behest of international markets and that’s understandable — up to a point.

“But when we look at retail price data from Eurostat over the same time period we see nothing like the swings in primary producer milk price — what we actually see is a very suspicious rigidity of price with minute swings in the prices paid by consumers and, presumably, a similar rigidity in retail margin.”

“If the argument is going to be that the consumer must be allowed the protection of a steady price and the retailer must have their steady margin then why can’t the primary producer have at least steady production-covering price? Why are farmers the only link without any element of steadiness as these figures show?” asked Mr Comer.

He said retailers make a margin on their dairy products when a high milk price is being paid to farmers, but said they then fail to reduce retail prices to match any fall in farm gate prices.

“In the last year, milk suppliers have seen their prices fall 33% from peak and yet — over the same period — we see a fall in, for instance, butter of a mere 2%. This is a casino system; the house always wins. On dairy products, the retailers always win. And only the retailers,” said Mr Comer.


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