Glanbia under fire over cut to base milk price

Farm leaders claim global trends support holding prices at October levels

ICMSA's Gerald Quain
ICMSA's Gerald Quain
Declan O'Brien

Declan O'Brien

The ICMSA has accused Glanbia of paying its milk suppliers a top-up "with their own money" after Glanbia Co-op announced it was supporting November milk prices by 2c/l.

Glanbia Ireland reduced its base price for November milk supplies by 2c/l to 30c/l (including VAT), but a support payment of 2c/l from Glanbia Co-op means that returns to suppliers remain unchanged at 32c/l.

However, the ICMSA has slated the move and questioned Glanbia Ireland's motivation for cutting its base price.

"I have no idea why Glanbia indulge in this practice of cutting base price and then returning it as 'top-ups', as if it was somehow out of the goodness of their hearts," said ICMSA dairy chairman Gerald Quain.

"Glanbia suppliers have indicated to us repeatedly that they don't want to be recipients of charity or to be paid 'top-ups' with their own money out of the co-op," Mr Quain said.

The ICMSA representative maintained that suppliers wanted a fair return for their milk based on what their processor received from the market. Mr Quain said that the indicative price level for such a payment was the Ornua index.

"If Glanbia want to pay a bonus or discretionary payment then they should pay it on top of the minimum market price, and that is the Ornua PPI. Cutting the base and then adding it back as a discretionary payment doesn't fool anyone - certainly not their suppliers," said Mr Quain.

Describing as "embar­rassing" the failure of the country's largest processor to match Ornua's PPI index, he said the base-price cut could not be justified by recent market trends.

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While accepting that global milk production had grown by 1.4pc this year, Mr Quain pointed out that October milk supplies were back year-on-year and were "not expected to grow substantially in the coming months".

This view was supported by IFA's Tom Phelan, who pointed out that the most recent market outlook from Rabobank should encourage co-ops to hold milk prices at current levels until spring.

"Rabobank shows that output from the big seven export regions (EU, US, NZ, Australia, Brazil, Argentina and Uruguay) is slowing dramatically at year end. EU supplies in particular will be affected well into spring by weather-related impacts on feed/fodder quantity, quality and cost.

"The evidence is already there that France, Germany and the Netherlands, which between them account for 46pc of EU milk production and 51pc of exports, are producing far less milk at year-end, and even for the full year compared to 2017," Mr Phelan said.

SMP levels

"We are also seeing a very fast reduction in the quantities of SMP held in intervention stock which until recently had depressed the market. Over 303,000t have been sold out, of which 60,500t last week alone, leaving just over 102,000t to be sold from January. Commissioner Hogan recently stated that the full stock could be gone in spring 2019," he added.

Announcing the reduction in its base price, Glanbia chairman Martin Keane said: "As highlighted in recent months, there has been a significant reduction in dairy market returns, particularly for butterfat, which we must reflect in the base milk price."

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