Farm Ireland

Wednesday 24 January 2018

Connacht Gold planning forward-pricing scheme

Declan O'Brien

Declan O'Brien

Option for customers to agree price for 10-15pc of supply

Connacht Gold is set to introduce a forward-pricing mechanism for manufacturing milk over the coming months.

The scheme details have still to be finalised, but it is envisaged that farmers will be able to agree a forward price for between 10pc and 15pc of their overall supply.

The level at which the forward price will be set has yet to be agreed, but it is likely to be below the current milk price.

Connacht Gold chief executive Aaron Forde described plans for the introduction of the scheme as "work in progress".

Mr Forde said the initiative was motivated by fears of continuing volatility in global dairy markets.

He said a forward-pricing structure would provide a degree of protection for milk producers, the co-op and its customers against peaks and troughs in milk and dairy commodity prices.

Talks between Connacht Gold and a number of customers regarding the scheme are ongoing, Mr Forde claimed.

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The scheme will initially be available for a 12-month period, at which point it would be reassessed by all participants.

"This has to work for the customers, ourselves and the farmer," Mr Forde said.

"If it works for all three, it will last."

Mr Forde was addressing a seminar in Carrick-on-Shannon that was hosted jointly by the Agricultural Science Association (ASA) and Agricultural Consultants Association (ACA) and was sponsored by Ulster Bank.

He predicted a softening of milk prices this year due to increased supplies from New Zealand and the US. But he said a collapse in milk prices was unlikely.

However, Mr Forde maintained that volatility would remain a feature of the dairy sector and would become particularly prevalent in the years before and after the end of milk quotas in 2015.

While he stressed that it was a personal opinion, Mr Forde forecast that commodity buyers would stand off the market in 2015 to see what impact increased output was having on markets.

This would result in "unusual price patterns" during 2015 and 2016, he claimed.

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