Business Farming

Saturday 30 August 2014

Kerry poised to make top-up milk payment

Caitriona Murphy and Declan O'Brien

Published 21/11/2012 | 06:00

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Speculation is growing that Kerry Group is finalising a 13th milk price payment to its suppliers for the end of 2012.

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Speaking at a meeting of Kerry milk suppliers in Limerick last week, a senior management figure appeared to indicate that a 13th payment was already a foregone conclusion.

When questioned about the possibility of an additional payment to milk suppliers, John O'Callaghan, general manager of Kerry's agri-business division, told farmers that there would be a 13th payment if required.

Milk price increases of 0.5-2c/l for October supplies have been announced by co-ops across the country in the past week.

Against this backdrop, there has been considerable disquiet among Kerry suppliers that the company has so far failed to indicate how it will meet its commitment to paying the "leading milk price".

Kerry gave the commitment as part of an agreement with co-op shareholders in return for cutting the co-op shareholding in the PLC below 20pc.

Dairy analysts put Kerry's milk price average for January-August this year some 0.7c/l behind Lakeland Dairies and 0.9c/l behind the West Cork co-ops.

Based on an annual milk supply of 900m litres, matching the Lakeland price would cost Kerry an extra €6.3m, while matching the West Cork price would cost it €8.1m.

But, a spokesman for Kerry Group refused to comment on what, if any, payments would be made to farmers.

"We have said that we will honour our commitment on milk price," the spokesman said. "We are trying to conclude our discussions on our milk contract but we will not be drawn into discussions on what payments will be involved."

Kerry Group PLC chief executive Stan McCarthy is to address the Teagasc national dairy conference in Tralee today, where he will talk on the future for Ireland's dairy producers post-quota.

The board of Kerry had made no change to its milk price for October, leaving it at 31c/l including VAT for milk delivered last month. Dairygold also remains on an unchanged milk price of 31c/l including VAT, following a board meeting on Friday.

The stagnation in prices at southern dairy processors contrasts sharply with northern equivalents, where prices continue to strengthen. Lakeland Dairies confirmed that its new milk price for October supplies is 33c/l, inclusive of all bonuses and VAT. This is an increase of 1.5c/l on its September price of 31.5c/l and brings it into line with Town of Monaghan, which moved to 33c/l last week.

Arrabawn co-op increased its milk price by 1c/l to 31.45c/l including VAT for October supplies, while Centenary Thurles also moved up by 1c/l to bring it to 31.5c/l including VAT for October milk. Wexford Creameries moved up by 0.5c/l to 29.98c/l including VAT.

Carbery increased its milk price by 0.5c/l on Friday to 31.53c/l including VAT and a cell count bonus of 0.4c/l. The increase is expected to be passed on by the west Cork co-ops to their suppliers.

The latest figures from the Department of Agriculture show that up to

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October 31 last, Ireland was running 2.82pc under quota, after taking account of butterfat adjustment. At the same time in October 2011, Ireland was already 1pc over quota.

Meanwhile, the prices paid for milk quota on the Department of Agriculture exchange last week plummeted by up to 30c/l in the first round of trading for the quota year 2013/2014.

The cost of quota in Dairygold fell from 50c/l to just 20c/l, while Glanbia's quota price fell from 41c/l to 18c/l.

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