Supermarket giants stay silent on growing crisis in liquid milk
Many of the country's largest supermarket chains are staying silent on a growing crisis in the liquid milk sector, despite dire warnings from industry insiders.
Only Musgraves and Aldi have addressed key questions posed by the Farming Independent about the future of the sector after Denis Murphy, chairman of the National Milk Agency (NMA), claimed it had reached a "tipping point" in the State body's annual report.
"The confidence of registered producers in the all-year-round supply model for liquid milk for the domestic market has been shattered by the costs incurred in winter milk production in 2012/13 and the absence of any market response at that time," said the former Ballyclough chief executive.
The NMA commissioned Teagasc's winter milk specialist, Joe Patton, to analyse the impact of higher costs on liquid milk producers last winter.
Despite conveying Dr Patton's conclusion that liquid producers would incur an additional 4c/l due to higher feed costs to processors and retailers, Mr Murphy said there had been no response from processors or retailers.
He added that the 7c/l increase that had been agreed between some retailers and the country's largest retailer, Glanbia, last month was not enough to stop the sector haemorrhaging suppliers over the next 12 months.
"Supplies for the coming winter are guaranteed since cows are already in-calf, but I firmly believe that the industry is at risk next year when farmers have the option of specialising in a seasonal system to facilitate greater expansion after quotas go in 2015," said Mr Murphy.
Liquid milk producers received just under 3c/l more than manufacturing milk price on average in 2012.
This was double the differential in 2011.
However, Mr Murphy believes the halving of the premium that liquid milk receives compared to manufacturing supplies over the last 20 years is unsustainable if the sector is serious about securing a future.
"There is also an issue with the retailers.
"Our analysis shows that the producer's share of the retail price has dropped from 43pc in 1995 to 32pc last year.
"During those 17 years producer prices increased by 1.3c/l, while retail price increased by 34c/l during the same period," he said.
"The liquid milk sector should not be just abandoned since there is a whole super-structure built around and dependent on it, such as the production of cream for the cream liqueur business."
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