Sunday 25 September 2016

Double whammy for dairy farmers

Louise Hogan and Darragh McCullough

Published 17/06/2015 | 02:30

ICMSA's Pat McCormack
ICMSA's Pat McCormack

Dairy farmers look set to lose out on the double this month as prices are cut and a refund on the massive €69m superlevy is delayed.

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The west Cork co-ops were meeting yesterday, followed by Aurivo today and Arrabawn and Dairygold tomorrow, and all are expected to follow the lead set by Glanbia and Lakeland Dairies decisions to drop May quotes by 1c/l and 1.5c/l, respectively.

While Glanbia suppliers will still receive 30.5c/l, courtesy of the 3c/l top-up from the €14m left in the shareholders' special reserve, other processors have started to drift below this mark as world markets weaken further.

A 1c/l cut on the peak milk supply month of May equates to a drop in farm receipts of close to €9m.

It also appears that another €46m in superlevy refunds will be withheld from farmers' milk cheques this month following an admission by ICOS that the Department of Agriculture's deferred payment system was unlikely to be in place in time.

Farmers hoping to avail of the scheme will be required to enter into a legal contract with the State, guaranteeing to repay the deferred superlevy over three years.

IFA dairy chairman, Sean O'Leary said that farmers need to know what is happening before the milk cheques are issued this week.

"It is important that co-ops are not holding back more from producers than they have to and if they have retained too much suppliers should be looking for a refund," he said.

Farmers that chose to participate in the scheme will become debtors of the Department of Agriculture and will be expected to repay the monies in equal tranches across the main milk supply months. Co-ops will be expected to pass the money on to the Department as it is collected. Should a farmer leave their milk purchaser, or change their ownership structure, or cease milk production, the balance will be payable immediately.

The delays come at a time when global milk markets are at their weakest level in over six years. Even though the purchasing index from Ornua - formerly the Irish Dairy Board - only slipped by 0.4pc to 98.5, a spokesperson for the organisation said market returns are now less than 24c/l.

"The May index implies a milk price below 29cpl [but] this price is reflective of business negotiated, for the most part, in the first few months of 2015," said Ornua's head of corporate communications, Jeanne Kelly.

'Insulated'

"Farmgate returns have been insulated from low market prices by the processors and Ornua to date, but there is a limit to how long this can be maintained. Current market returns are below 24cpl and this will have an impact on the purchasing index in the coming months," she said.

However, the ICMSA slammed the comments and cuts, claiming that the index was proof that milk prices should remain unchanged.

"If processors decide to cut milk price for May then they'll be disregarding the prices achieved by products traded in the last month," said ICMSA deputy president, Pat McCormack.

"The decision of Lakelands to cut price by 1.5c/l to 28.75c/l for May is inexplicable," he said, highlighting the growing gap between Northern and Southern Hemisphere prices.

"Estimated EU average milk price stands at €31.03 per 100kg for May, down from €31.30 in April. Ornua and the co-ops have repeatedly highlighted their strategy of investing in value-added products over the last number of years and this must surely be the time to show farmers the difference between commodity prices and value-added prices," he said.

Mr McCormack also noted that when Ornua's index was at 98.5 in August 2012, milk was at 30c/l.

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