“We buy everything off Glanbia [now Tirlán]. Meal, fertiliser, detergent, even the dishwasher tabs come from the co-op,” says Seoirse McGrath.

“We trusted them, and they let us down.”

Seoirse and his father, Joe, farm a dairy herd in Moneylane, just outside Arklow in Co Wicklow.

The McGraths have 84% of their milk in fixed-price schemes, ranging from 30-32c/l. They are losing 20c/l on every litre sold at this price. It’s threatening the viability of their well-established dairy farm.

Fixed-milk-price (FMP) schemes are supposed to reduce the risk involved in dairy farming. The McGraths have long participated in the schemes, and with Seoirse in the process of taking over outright from Joe, they were keen to minimise exposure to volatility.

The McGraths would typically have put about 17% of their milk into each scheme. To do this, they would apply for almost half their milk to go into each scheme.

With schemes continually oversubscribed, only a proportion of milk applied for was allocated.

In September 2021, having consulted with their co-op for advice, the McGraths applied for almost 40% of their milk to go into the latest FMP, known as FMP17. This time, they got every litre they applied for.

Now, instead of a planned-for 50% of milk in FMPs, 84% of their milk for 2022 was committed at between 30c/l and 32c/l, through four separate schemes.

When fertiliser and feed prices exploded through the winter, they realised they were in bother. Putin’s invasion of Ukraine has seen input prices surge through the year.

Fortunately for most farmers, the milk price has kept pace. But for those with a high proportion of milk fixed forward, a nightmare unfolded.

Steps taken

Glanbia took three separate steps to address the issue. An “agri input support payment” of 5c/l was paid on all milk delivered in June, with 6c/l similarly paid in July. This effectively was a mechanism to pay an increased milk price for those months on fixed milk as well as milk not involved in a price scheme.

Secondly, a support loan, worth 5c/l, was offered. This will be repaid from future milk cheques in six payments in 2023 and 2024.

Thirdly, it introduced a new fixed milk price scheme that required farmers to lock in for two additional years. This scheme has actually angered the McGraths, and many other farmers with high volumes.

For an average 100-cow producer, that’s €11,600 lost in a single month. It’s over €110/cow for July alone

This offered to pay them 40c/l for their fixed milk in 2022, but in return milk would be tied into a fixed price for two more years. “If we had signed on for that, we would have three-quarters of our milk in a fixed scheme again in 2023 and 2024, all at 38c/l. With fertiliser and feed prices where they are, that would leave us potentially losing money hand over fist for another two years,” says Seoirse.

“Turning that down leaves us facing huge losses this year, and we’ll still have 40% of our milk at 32c/l next year, but at least the worst will be over by then.”

To put these prices in context, the Glanbia base price for July was 57.58c/l (VAT included). Even allowing for the 6c/l input support payment, the McGraths are losing 20c/l on 84% of their milk. For an average 100-cow producer, that’s €11,600 lost in a single month. It’s over €110/cow for July alone.

The McGraths have more cows than the average producer, and as liquid milk producers, would actually have higher losses per cow.

“How could the fixed milk price scheme suddenly go from under half the volumes applied for to every litre applied for being granted,” says Joe, “with absolutely no warning, and no option to reduce, withdraw, nothing.”

Joe attended the Glanbia AGM, and made an emotional plea for understanding and assistance.

He has been very disappointed with the response. The de-risk mechanism has risked everything.