Billion euro cost of milk price crash
Published 12/08/2015 | 02:30
The massive fall in milk prices looks set to remove €1bn from the rural economy this year.
The ICMSA has calculated a 17pc fall of 6.4c/l will reduce milk cheques to dairy farmers by €586m alone in 2015. However, an even more drastic picture of the impact of the dairy price crash emerges when the impact on the wider rural economy is considered.
It comes as Kerry Group chief executive Stan McCarthy admitted the year-long bear market for dairy commodities had become "extremely dangerous" and it was becoming uneconomical for suppliers to maintain production.
"If markets were to stay at this level long term - by that I mean to the end of 2016 - then that would be very problematic," he said. "The question is how long will this cycle last."
Using an average milk price of 38.4c/l in 2014, the ICMSA estimate the average milk price in the first third of this year to be just under 30c/l, and the May-June price to be 27.9c/l. A figure of 26c/l was assumed for July, with an average price of 24c/l for the last five months of 2015. When monthly milk deliveries are factored in, the average milk price for 2015 works out at 28c/l.
On the back of a drop in milk receipts, if an economic multiplier of 1.7 is applied to take into account the wider impact, it would mean €1bn is removed from the rural economy.
The ICMSA's deputy president, Pat McCormack warned that the losses would be even greater next year if dairy policy 'complacency' continued and if prices fell as far as 24c/l.
"The Government and EU are duty-bound to prevent prices falling as far as 24c/l," he said.