Farm Ireland

Tuesday 23 January 2018

Gap between dairy farmer incomes and those of processors highlighted

GEA dairy system
GEA dairy system
Gerald Quain, ICMSA

Farming Independent Team

The gap between dairy farmer ­incomes and those of the "processing and ­marketing" sectors was highlighted by the massive hike in profits announced by Ornua for 2016, the ICMSA claimed this week.

Operating profits at the co-op-owned business jumped 46pc to €26.6m last year, with turnover up 9pc to €1.75bn.

While welcoming Ornua's strong results, ICMSAs Gerald Quain noted that the surge in profits was delivered against a backdrop of collapsed milk prices in 2016 which had wiped out farmers' ­margins and incomes.

The ICMSA dairy committee chairman said it was clear "that the other links in the dairy supply chain" guarded their own margins and simply pushed any losses backwards on to the farmers.

Mr Quain said increasing profits in a year when farmers' margins were slashed highlighted the disparity between what he called the "hard pressed foundation level" of the Irish dairy sector and the "processor/marketeer level".

He called for the "co-op ethos" to be maintained and that "the pain" should be shared during periods of market downturn.

"Increasing profits in a year when farmers' incomes were at rock bottom only confirms what we already knew: every link in the supply-chain might benefit when prices are rising but only farmers' margins are wiped out in a price downturn," he said.

"This runs counter to the co-op ethos."

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In their 2016 results, Ornua stated that it had suspended collection of its farmer milk levy in May of that year due to the sharp fall in farmer returns.

It is generally worth around €7m to the business.

Meanwhile, co-op shareholders in Ornua insisted that the €14.5m members' bonus announced last week will be used to support milk prices. However, a direct payment to farmers will not be made.

Dairygold pointed out that it had supported milk prices in 2016 to the tune of €25m. The co-op said it had "ongoing visibility of the expected Ornua bonus" and that this was "factored into price making decisions".

A spokesperson for Arrabawn said: "The annual Ornua bonus is part of our normal revenue streams and Arrabawn will be using this year's in the same way it has previously, to support milk price."

A Glanbia spokesman pointed out that: "The special bonus was paid out by Glanbia last year in two instalments. The trading bonus announced by Ornua this week is part of normal milk price returns."

A statement from Lakeland said: "Whatever Lakeland gets from the marketplace goes back out to our milk suppliers as part of our monthly milk price. Lakeland Dairies will continue to pay the highest possible milk price in line with market conditions."

Lakeland also confirmed that it was holding its April milk price at 31.28c/l (VAT inclusive). Glanbia and Kerry's milk price remains unchanged at 31c/l (VAT inclusive).

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