Farm Ireland
Independent.ie

Saturday 23 September 2017

Glanbia blames 'huge increase in raw material costs' for milk price hike

Glanbia stressed that it does not set the retail price of milk and it is up to retailers as to whether such price increases are passed on to the consumer.
Glanbia stressed that it does not set the retail price of milk and it is up to retailers as to whether such price increases are passed on to the consumer.
Margaret Donnelly

Margaret Donnelly

Glanbia is increasing the price of milk to retailers and has told its agents that a 10pc increase over the past seven months in raw material prices has led it to increase the price of milk it sells.

Glanbia confirmed that its Avonmore milk range to agents, who supply independent shops, is to increase by 3c/L from February 5.

It also confirmed that it is implementing a price rise to retailers, but could not confirm how much.

A letter sent by Glanbia to its agents, and seen by FarmIreland.ie, states that "due to the huge increases in raw material prices (10c/L) over the past seven months, we will regrettably have to increase the price of all milk to you by 3c/L".

One agent said the price hike would have to be passed onto shops who, in turn, would have to pass it on to the consumer.

“It's getting to the stage that it'll be cheaper for me to buy it in the supermarket than off Avonmore,” he said.

The price hike also includes bulk cream, which is increasing by 25c/L. 

“This price increase means that a gallon of cream has gone up by €1. It’s the consumer who pays for it though.”

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Glanbia said, in its letter to agents, that it has not increased the price of its 2L branded milk for the past nine years, with the exception of five months in 2013.

A spokesperson for Glanbia confirmed that increases in sell-in prices for the Avonmore milk range have also been implemented on the retail sector, but stressed that Glanbia does not set the retail price of milk and it is up to retailers as to whether such price increases are passed on to the consumer.

ICMSA Dairy Chairman Gerard Quain said: "It’s interesting that Glanbia cite the rise in price paid to farmers as the reason why they must hike their own price to the agents. But when the price paid to farmers collapsed by around 40pc over the 18-month period up to last August, no-one else’s margins suffered."

"It’s difficult to avoid the conclusion that increased costs are passed back to the farmers very quickly indeed while opportunities to increase their own margins are ‘sat on’ indefinitely.

"This is not a specific criticism of Glanbia but it’s a fact that at the same time as farmer milk price collapsed and opportunities presented themselves for everyone else in the supply-chain to keep or increase their margins, those opportunities were taken while the farmers ended up with 18-odd months of prices below the costs of production."

He also said of the Glanbia announcement that despite the fact that they’re going to charge their agents 3c/L more that they haven’t announced any price rise for their liquid milk suppliers.

IFA National Liquid Milk Chairman John Finn said that in recent years the liquid milk premium paid to farmers has failed to cover their higher winter production costs.

"Evidence is stacking up that this will lead to shortages of fresh local milk for consumers”.

IFA, he said, has shown that it costs an annual average of 40c/L, including a modest wage, for a liquid milk producer to supply a contracted quantity of fresh milk every day of the year. 

"The recovery in global dairy markets has led to an average increase in creamery prices paid by co-ops of around 6.5c/l from June to December. While this has benefited liquid milk producers and has helped them negotiate slight increases in their winter payments, we still expect their annualised price to fall up to 10c/l short of the 40c/l they need to break even,” he said.

He also warned that a failure to redirect more of the margins to farmers would result in a locally produced fresh milk supply disappearing from supermarket shelves.

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