Irish farmers are lucky that the majority of product goes for commodity products like cheese, powders and butter.
Why? Prices for all these commodities have risen on a global scale, so farmers can get their rightful share or at least what the processor delivers back to the farmers, who, in most cases, are the owners of the business.
We publish the April prices in full in the Irish Farmers Journal this week and it shows there is actually very little between the milk processors in terms of price at the moment and they are paying farmers between 46c and 49c/l ex-VAT at base solids.
When we convert this to cents per kilo milk solids (MS), it comes in around €6.70/kg MS at current day milk fat and protein.
If a cow is producing 2kg MS/day at the moment, it means the output value is close to €13/cow/day. That’s almost €100/week.
Across the water
Across the water and into the EU, milk supply continues to drop, yet some retailers seem to be persisting with cheap milk options and are seeking re-tender processes for some liquid milk and milk product contracts.
I hear one UK retailer has put almost its entire dairy portfolio up for tender. Some 386m litres of fresh milk, flavoured milk and, seemingly, 9,000t of butter and 25,000t of cheese are all in the mix.
While this might be extreme, we understand it isn’t the only firm out to tender or with fractured relationships with processors that threaten future supply.
They have ignored phone calls from suppliers, not responded to emails, and blankly refused to engage
Industry sources in the UK suggest retailers have also been very slow in accepting perfectly reasonable requests for price increases over the last eight months.
They have ignored phone calls from suppliers, not responded to emails, and blankly refused to engage with suppliers.
What will happen? The UK processors will gradually look to export rather than keep the milk local. This potentially leaves a gap for Irish product, but that has a better home now also.
Price up for liquid gradually
Meanwhile, on the liquid milk front, my UK sources suggest the retail price has moved again. April saw the four pint price rise from £1.15 to £1.25 (€1.47). It is now at £1.29 (€1.51) after Aldi moved again.
Thus prices are up 12% already, with more to go probably as two processors are now on 46p (54 c/l) for June and July, and other surely following.
At £1.29 a pack, and with the price the likes of Sainsburys and Tesco are currently paying their farmers (c.41.5p) they are likely losing 6 – 7p. However, Tesco has just put its price up for July to 42.35p, and they’ll be losing nearly 9p then!
If it then matches Arla (which it will have to do) then it will lose 17p! In order to bring the losses back down to current ones the four pint price needs to move to £1.39 (€1.64). I was over in London recently and I called into a Sainsbury store to check out prices and the Organics selection – I must publish that article next week.