The Irish Creamery Milk Suppliers Association (ICMSA) has hit out at the latest cut to milk price, labelling the move as “horrendous”.

On Wednesday, Lakeland Dairies cut its milk price by 3.81c/l excluding VAT to a base of 37.82c/l.

Chair of the ICMSA dairy committee, Noel Murphy, has said that attributing the precipitous fall in milk price to a oversupply relative to demand was to ignore what was actually a much more fundamental problem with the existing dairy pricing system.

ADVERTISEMENT

He said the recent history of milk price boom and busts demonstrated a primitive market that protected every other component in the market through the expedient of loading all the risk onto the farmer-producers.

He said that effectively all the links further up the supply chain are using farmer price and farm income as a market correction device and a risk management tool.

Reset button

“It’s hugely important that we all see clearly what’s happening here. This isn’t any kind of invisible hand of the market at work.

“What’s happened here is that the other components of the dairy markets knowingly use farmer milk price as a reset button for dairy product price movements. They do that in the full knowledge that reducing milk price leaves them untouched,” he claimed.

“It’s really important to emphasise that farmer aspect there: no-one else’s margins or incomes are affected when we get the kind of price collapse we are seeing now. They all protect their own position in the knowledge that our reduced milk price and wiped income is effectively the reset button for the whole cycle to start again,” he said.

Forward contracts

He said farmers are questioning where all the processors forward sold contracts at defined prices have gone.

“These are always cited when prices are rising but are nowhere to be seen when the markets fall.

“The markets suddenly weakens and - bang - the farmer takes the hit straight away. This is an absolutely primitive way of managing a sector, it’s utterly destructive and it’s simply unsustainable for the family dairy farm to be the only ones left holding the baby when the markets fall,” he said.

Murphy said that the farmer milk price reductions over the last two months would represent a loss of €32,000 if applied to a full year for a 400,000-litre milk supplier.

“Who else is expected to just take an income hit like that?” he asked.