Dairy co-ops urged to pay 2011 bonus to suppliers
Published 11/10/2011 | 05:00
Dairy co-ops have been urged to pass back some of their improved 2010/2011 profits to milk suppliers in the form of an end of year bonus.
As co-op boards gather across the country this week to decide on September milk price, the IFA has called for the bonus on all 2011 supplies.
Despite a weakening of the global dairy markets in recent weeks, European markets have remained stable at relatively strong price levels, IFA dairy chairman Kevin Kiersey maintained.
He added that it was crucial that the increased profits be used to invest in greater co-operation between co-ops for the future of the sector, but farmers should also benefit from the improved situation.
Meanwhile, ICOS, in its October newsletter, has suggested that Irish co-ops should look closely at the transparent milk pricing mechanism used by Fonterra. The New Zealand milk giant recently outlined that suppliers will be paid based on the revenue that their co-op would generate if all its milk was converted into commodity whole milk powder (WMP), skim milk powder (SMP) and their by-products, known as reference commodity products.
The calculation includes the cost of raw milk transport to Fonterra's factories, efficient manufacture of the reference commodity products and transport to the point of export.
However reference commodity products only comprise around 70pc of Fonterra's total production and the farm-gate milk price does not include any returns from value-added products such as infant formula, specialised protein products and branded consumer dairy products.
The Fonterra milk pricing mechanism is aimed at ensuring that the milk price paid to farmers is calculated in a consistent, transparent way that can be independently verified.