Farm Ireland

Friday 21 October 2016

Kerry defends its stance on July milk price

'Market positions' to blame for decision to stay at 22.5c/l

Declan O'Brien

Published 23/08/2016 | 02:30

IFA president Joe Healy said Kerry were wrong not to increase prices
IFA president Joe Healy said Kerry were wrong not to increase prices

Kerry Group has rejected criticism of the decision not to increase its July milk price.

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The company held its base price at 22.5c/l, although the other leading dairy processors sanctioned increases of between 1c/l and 1.5c/l.

IFA president Joe Healy said Kerry were wrong not to increase prices and he called on the company's management to revisit this decision "for the sake of their cash-strapped suppliers".

However, a spokesman for Kerry pointed out that the company had supported milk price through "this year and last year".

He welcomed the "improved signals" in global dairy markets and predicted that this would "undoubtedly be reflected in improved market returns."

But he said Kerry had "market positions taken already" and the company would "have to honour current commitments".

Over the last week Dairygold increased its base price for July to 24c/l. Glanbia is on 23c/l for July supplies, Lakeland Dairies is on 24c/l and Arrabawn on 24.25c/l.

The GDT jumped by 12.7pc last week as a serious rebound in world dairy markets gathered pace, and the farm organisations want dairy processors to pass back the benefits of the higher prices available to their milk suppliers.

IFA's Sean O'Leary pointed out that EU Milk Market Observatory's figures showed an accumulated uplift over the last 14 weeks of 40pc for whey powder, 32pc for butter, 18pc for whole milk powder, 12.5pc for cheddar and over 9pc for skimmed milk powder.

"Taken together in a representative Irish product mix, this is equivalent to a gross return, before processing costs, of close on 31c/l. That would be equivalent to a farm-gate price of 26c/l plus VAT or 27.35c/l including VAT," Mr O'Leary said.

This view was shared by Gerard Quain of ICMSA."The GDT weighted average price was US$2,731 in the last auction," Mr Quain said.

"The prices being paid by Irish co-ops in October 2015 was 25-28c/l and in July 2012 it was 28-31c/l and those were the two last occasions that the GDT was at the US$2,740 range," he pointed out.

"Taking account of the fact that we are coming out of a market slump and even factoring-in forward contracts, ICMSA thinks it is not unreasonable of Irish farmers to expect that Ornua and our dairy processors can deliver a price in the lower band of 25-28c/l for August with further improvements going into September," Mr Quain maintained.

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