Farm Ireland

Monday 19 March 2018

Dairy farmers face €3m hit on milk protein levels

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Declan o'brien

Under pressure dairy farmers are facing a €3m hit due to a significant drop in milk protein levels through June, with payments to individual suppliers likely to be back by as much as €200 to €300.

Processors confirmed that protein levels in milk dropped by close to 0.1pc in early June, falling from an average of 3.5pc in 2015 to 3.41pc for the same period this year.

This fall in protein content converts to a milk price reduction of almost 0.5c/l. Even allowing for an improvement in milk solids as the month progressed, the overall cost of the protein drop could exceed €2.50/cow or €3.25m across the national herd.

With cheques for June milk due to go out to farmers from this week, the likely payment reductions due to lower protein levels could range from €180 to €240 for the average 80-cow herd. The drop could reach €270-360 for 120-cow herds.

The fall-off in milk protein was blamed on the rapid increase in grass growth at the start of June.

Teagasc dairy specialist John Donworth said cows were in grass "up to their udders" at the time and the feed value of these swards was hit as a result.

He said the price hit piled extra pressure on dairy farmers at a time when cash flow was already extremely tight.

"It won't break the bank but it is piling misery on misery," Mr Donworth said.

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Although processors accepted that protein levels had fallen in early June, they pointed out that milk solids had bounced back over the last three weeks.

"Milk constituents have improved in the recent weeks and are now almost in line with 2015 levels. In 2016, protein levels have tended to be running lower than last year. However, it should be noted that milk constituents in 2015 were exceptionally strong," a Glanbia spokesman said.

Dairygold pointed out that while protein figures were back 0.06pc in May and June, this trend had started to reverse. The co-op also pointed out that butterfat figures for the same period showed increases of 0.04pc.

ICMSA dairy chairman Gerald Quain said the impact of constituent reductions on milk price varied from processor to processor and depended on the weighting given to protein and fat in the milk price calculation.

Meanwhile, the farm organisations have reacted angrily to the decision by the main processors to hold milk prices for June.

Glanbia confirmed that it will hold its June milk price at 22c/l including VAT for co-op members. This price is inclusive of a 2c/l top-up from Glanbia Co-op.

However, ICMSA has accused the main processors - including Glanbia, Kerry and Dairygold - of underpaying their milk suppliers.

Mr Quain pointed out that the Ornua PPI index equated to 22.5c/l and included a processing cost of 6.5c/l. He questioned why processors were not returning this in full to their suppliers.

"Any co-op paying less than 23c/l at this stage is demonstrably underpaying their farmers based on markets returns," Mr Quain said.

"Co-ops need to urgently address the glaring anomaly where their milk price is below the Ornua PPI," he added.

The IFA has urged processors to make a firm commitment to at least hold their farmer payouts to year end, while exploring every opportunity to pass back the benefits of improving dairy market prices to suppliers.

The call came in a letter sent to processor boards by president, Joe Healy and dairy chairman Sean O'Leary.

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