FARMERS WILL NOT PAY FOR MARGIN EROSION WARNS MULLIGAN

IFA Liquid Milk Chairman Padraig Mulligan said farmers would not pay for the profligate margin erosion dairies had indulged in to either gain or protect market share. With winter milk price negotiations about to start between dairies and producer groups, Mr Mulligan warned that dairies need not come back to farmers expecting them to take lower winter premiums or payments on the back of improved manufacturing milk prices. Strong winter prices will be needed, especially with rapidly rising feed prices, to secure milk supplies for the drinking milk trade this winter. “Dairies have been playing a dangerous game, especially in the last 12 months, whereby they have either indulged retailer demands, or anticipated them, and frittered away margins to retain or expand market share. Farmers cannot afford, and will not accept, to foot the bill for such foolish and destructive behaviour. Dairies must deliver viable liquid milk prices, and challenge retailers on margins if that is what it takes,” he said. “IFA has shown that farmers needed a minimum annualised average of 36c/l + VAT for 2010/11 to justify their continued involvement in year-round liquid milk production, to cover their bare costs and pay themselves a very basic wage,” Padraig Mulligan said. “Dairy ration prices are up 14% or over €30/t, and feed accounts for over 50% of the average liquid milk producer’s variable costs. Furthermore, to justify continuing in a very labour and capital intensive production system, thereby securing adequate quantities of fresh, quality milk for the drinking trade, farmers need to be able to secure returns in excess of what spring creamery milk production would yield,” he added. “Producer groups are about to meet with dairies to negotiate liquid milk prices for the 2010/11 winter months. Dairies must engage in earnest and return sufficiently strong winter prices for the coming months to set them on their way to return an annualised average of at least 36c/l + VAT for 2010/11,” he concluded.