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Dairy farmers fume at milk price freeze

Milk suppliers in the south and west have reacted angrily to the failure of Kerry Group, Dairygold and Connacht Gold to increase milk prices for August.

All three processors have held returns for last month despite a recovery in world markets over the past three weeks that has seen the Fonterra and Dutch auction prices lift significantly and the Irish Dairy Board (IDB) increase returns to processors by the equivalent of 3c to 3.5c/l.

Connacht Gold has held on 28c/l including VAT, while Kerry and Dairygold are paying 29c/l.

In contrast, Town of Monaghan has increased its milk price for August by 1c/l and is now quoting 30c/l. Lakeland Dairies and Arrabawn are both up 1c/l, with the former now on 30.28c/l (including lactose bonus) and the latter on 29.45c/l. Glanbia has also moved to 29.5c/l, while Wexford is up 1.25c/l to 28.66c/l.

Connacht Gold suppliers have expressed dissatisfaction that the co-op is out of step in terms of milk price with Lakelands, Arrabawn and Town of Monaghan, although management at the weatern co-op said that a milk price rise was likely in September.

It is a similar story in the south, where the West Cork co-ops are understood to be holding at 31c/l, maintaining a 2c/l differential over their neighbours in Kerry and Dairygold.

With farmers struggling this summer because of the wet weather and higher input costs, the variation in milk prices between neighbouring co-ops has become an extremely thorny subject.

For a dairy farmer with an 80-cow herd the 2c/l difference in milk price between the West Cork co-ops and Kerry and Dairygold equates to around €940 for August as a whole, given an average milk yield of 19l/cow/day.

This differential has provoked serious disquiet among Kerry and Dairygold suppliers. The price issue has been further complicated in the case of Kerry by the commitment given by the company last year to pay the country's "leading milk price".

The commitment was made as part of the process last summer that saw farmers vote to allow Kerry Co-op's shareholding in Kerry Group Plc drop below 20pc. Kerry Group has insisted that it would honour its commitment and that it would pay the leading price for milk supplies on a "like for like" basis. A spokesman for Kerry said that if an end-of-year adjustment was needed to reflect the company's milk price commitment, it would be implemented then.

He said the company had maintained a strong milk price through the year, but couldn't be expected to react to market changes on a monthly basis when much of their product was sold in forward contracts.

Negotiations are continuing between farmer representatives and management at Kerry on an agreed method to set milk price.

But farmer representatives said there was "uproar" over the refusal of Kerry to raise the August milk price and some accused management of "dragging their heels" on pricing talks.

Meanwhile, milk prices were likely to remain strong into the middle of next year, a leading US farm specialist told the Agricultural Science Association (ASA) conference last Friday.

Professor Bob Young, chief economist with the powerful American Farm Bureau Federation in Washington, told the conference that severe drought had led to a 30pc reduction in US maize yields.

With feed prices forecast to remain high into next year, Prof Young said milk prices were unlikely to fall.

"Futures markets say milk prices will hold at current levels for the rest of this year and much of next year. The growth in milk production at the beginning of this year has now stopped and milk supply may well be down next year, which will further help to keep prices up," he said.

US milk prices have increased by nearly a third over the past three months.

full report on the asa conference see page 5

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