Glanbia cut of 2c/l sparks fears of further milk price reductions
Published 11/06/2014 | 02:30
Glanbia's decision to cut its May milk price by 2c/l to a base of 37c/l (including VAT) could herald the start of a general slide in milk prices this summer.
With a number of processors due to meet this week to set milk prices, the belief in the industry is that by moving on price Glanbia Ingredients Ireland Limited (GIIL) has opened the door for other processors to follow suit.
"Everybody was hoping that either Glanbia or Kerry would kick the price cuts off. Nobody wanted to be the first to move for the peak supply months of May and June," one processor source admitted.
If the Glanbia move is followed by other processors the price drop will cost dairy farmers €75m to the end of the year, as almost three-quarters of the country's 5.5bn-litre quota is delivered between May and December.
The ICMSA has estimated that the drop in price will cost a farmer with an 80-cow herd and a 350,000-litre milk supply close to €1,000 for May and the same for June, and up to €5,000 to the end of the year.
However, there are fears in the industry that this could be the first in a two- or three-stage cut which will see milk prices fall by up to 5c/l this summer.
Processors argue that the price reductions introduced by the Irish Dairy Board for commodities since December equate to a 5c/l discount.
Dairies have also defended the price cuts on the grounds of weaker international markets since late last year and historically high milk prices.