Farm Ireland
Independent.ie

Wednesday 18 July 2018

Milk price difference leaves some farmers earning thousands less than others

Margaret Donnelly

Margaret Donnelly

Some dairy farmers are earning thousands of euros less than others, based on the base milk price paid by the main eight processors.

According to analysis by the IFA, a farmer supplying an average of 350,000L, whose May production accounts for 13.7pc of annual output, faces base value discrepancies varying from €879 less to €487 more when compared to the average of the eight main co-ops’ base prices for the month of May.

IFA Dairy Chairman Tom Phelan said the analysis deliberately excludes the weather and fodder supports paid on May milk supplies by some co-ops as they are unlikely to last into the future and takes account only of base milk prices net of VAT for milk at 3.3pc protein and 3.6pc butterfat.

“Co-ops must also address the price gaps that have developed. According to our analysis, if the gaps between the prices paid by the main eight milk purchasing co-ops persist for the rest of the year, a farmer receiving the lower of the eight prices would earn €4,749 less than if he had received the average price. 

"Meanwhile, if he received the highest of the eight prices, he would earn €2,632 more than if he had received the average price.

“We excluded the weather/fodder supports in this comparison because they are unlikely to survive as top ups into June but we would argue that they should be incorporated into the base price for June milk. 

The graph shows a May base milk value of a 350,000 litre supplier, net of weather/fodder supports, calculated on the basis of 13.7pc of his annual output (national average for 2017), using the relevant co-op’s declared base milk price and its plus/minus variation with the simple average of the base price declared for May by the eight co-ops.
The graph shows a May base milk value of a 350,000 litre supplier, net of weather/fodder supports, calculated on the basis of 13.7pc of his annual output (national average for 2017), using the relevant co-op’s declared base milk price and its plus/minus variation with the simple average of the base price declared for May by the eight co-ops.

"In addition, prices must be further lifted to reflect significant improvements in market returns.

“Co-ops will be deciding on June milk prices in a week or two, and this is their chance to start improving their base price to reflect stronger dairy prices." 

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He said that co-op boards need to pay a competitive milk price as well as a milk price that fairly reflects the improved value coming back to co-ops in recent weeks.

He also said that improved market returns must be used by co-ops to allow farmers to benefit from the upturn in dairy markets, but also to help narrow the costly milk price gaps that have developed between co-ops in recent months.

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