Aug 222014

Dairy farmers are counting the heavy cost of a declining milk price over the summer months with the reduction to date costing dairy farmers approximately €60m and will total €140m for 2014 on the basis that there will be no further reductions in milk price for the rest of the year, according to Mr. Pat McCormack, Deputy President and Chairperson of ICMSA’s Dairy Committee.   With the superlevy situation at 6.79% over quota at the end of July, many farmers are facing the prospect of drying off cows early and perhaps not getting another milk cheque until next May and with significant on-farm investment in advance of quota abolition, cash flow is going to be a major issue on many farms over the coming months.

With such fine margins on farms, every cent really does make a difference, the recent fall of prices from 39cpl to 35cpl has cost an average producer of 300,000 litres close to €1,200 for the month of July.   This follows a loss of €600 for the June and May milk cheques.   However, despite negative comments regarding milk price from some people, there are pluses and given that we are in the August period, the last Global Dairy Trade Auction is surprising in that it sold the second highest volume of product since January and also had the largest number of buyers, it strongly suggests that demand for dairy products remain strong, and with EU and regions like China moving into their quiet production periods, all is not negative and it is essential that hasty decisions are not taken.   When you consider that an additional seven billion litres of milk has been produced globally in the first half of 2014, this indicates that the market has absorbed this additional supply and there should be and is no need for knee jerk reactions.

Dairy farmers expect that the Irish Dairy Board and processors with their strong profits in 2013 and in the first half of 2014 along with their considerable investments in value added will be in a position to pay Irish farmers a strong price and also to demonstrate clearly that they have the financial and marketing capability to deal with volatility in advance of quota abolition and their drive to get their suppliers to produce more milk.   Farmers expect that their marketing and processing arms can demonstrate their volatility plans over the coming months and not simply pass back the pain to farmers who have already seen €60m taken out of their pockets this year, concluded Mr. McCormack.

ENDS.   22 August 2014

Pat McCormack is at (087) 7608958.

Deputy President, ICMSA