By Irishexaminer.com,Rachel Martin

Copyright irishexaminer

Dairygold Board reduced its August Quoted milk price by 3cpl to 45cpl, while Tirlan announced a 2.5cpl drop for August milk. Dairygold Chairperson, Pat Clancy, explained there had been a “dramatic deterioration” in global dairy prices over the last three to four weeks.

“Increased global milk supply and weaker consumer sentiment have seen key Dairygold products, especially butter and cheese, fall by well over 3cpl,” Mr Clancy said. “The speed, timing and extent of the market falls are challenging, as they emerge after the peak processing period, with seasonally higher stock levels exposed to these declining market returns.

“There is evidence in the marketplace of inventory being offloaded, putting further pressure on returns. Dairy Market Futures show no immediate signs of recovery over the coming months, and our priority now must be to take decisive action and re-align our milk price with market returns.”

A spokesperson added that the firm would continue to focus on reducing spend and improving business margins.

However, ICMSA Dairy Committee chairman Noel Murphy said the cuts were “wholly disproportionate”.

“Firstly, the downturn in the market has taken place in September, not August, to which these price cuts relate and are being applied,” he said.

“The second point we’d like to draw attention to is the very obvious discrepancy that has the co-ops telling farmers that they’re ‘locked-in’ to forward prices when farmers point to a rising market, while often the very same co-ops seem to be able to opt out very easily of the ‘forward price straitjacket’ in a falling market.

“They can’t pay farmers in a rising market because they’ve sold ‘forward’ at lower prices, but they can drop the price like a stone in a falling market and we don’t hear too much about higher forward prices then,” said Mr Murphy.

IFA Dairy Chair Martin McElearney described the cuts as “totally over the top”.

We appreciate that butter markets are under pressure and global milk supply is up, but a cut of 3cpl was not expected and has left farmers frustrated and angry.

“Global milk supply forecasts have been revised upwards in recent weeks, growing to 1.4-1.6%, which is indicative of ample supply.

“At the same time, the futures market for butter has declined to €5,600 – a drop of 11% in one week. However, the latest GDT auction proved relatively stable, only dropping by 0.8%.

“Co-ops need to take a measured response to this correction in the marketplace. Knee-jerk reactions undermine farmers’ confidence in our co-op structure. Co-ops must endeavour to return the best price to their suppliers and refrain from drastic cuts.”