ICMSA Dairy Chairperson, Noel Murphy, has stated that while dairy markets are under some pressure at wholesale level which resulted in Co-ops imposing massive cuts to farm gate prices price in the first two months of 2023, it is time for these milk purchasers to show their mettle over the next number of milk price announcements and define and emphasise the benefits of our products in a way that raises them above base commodity spot prices.
“It has been well known and commonly accepted that farmgate price never reach the highs of the wholesale markets, but the opposite should also be correct: farmgate price should never go as low as the bottom falling wholesale price. Against that principle, the base price of milk needs to be held at current levels – at a minimum – for the remainder of 2023.
“Commodity spot prices spent over four months in the early to mid-60s cpl in 2022 and the highest base price returned was 58cpl in 2022. There is no doubt that prices had to come back, but it is now approaching a level where costs of production are coming close and, in many cases, exceeding the base price. ICMSA analysis shows that the cost of production for 2022 was more than 40cpl when fertilizer was purchased at the height of the market. Given that many dairy farmers have paid very significantly for their existing stock, it is likely that these cost levels will prevail for the early part of 2023.
“This means that February milk price was at or exceeding the cost of production – a figure which we’d stress does not include a farmer’s own income. We are getting dangerously close to the disastrous ‘crossover’ point where costs per litre exceed Co-op payment. That can’t happen and there’s no need for it to happen if the Co-op boards do their work and get after the value that they have always insisted they’ve built into our products ,” said Mr Murphy.
He warned that if there is a further cut to the price paid for March milk, it will mean that margins are completely wiped out and Co-op boards simply cannot allow this to happen.
“What’s even more unacceptable is that these savage cuts are happening at a time when we consumers are still seeing food inflation; so someone along the line is effectively taking the farmers’ margin”, he said.
Concluding, Mr Murphy called on Co-op boards to remember that peak production and the price at which it is paid determines a lot of financial decisions for the remainder of the year.
“It is now time to ensure that dairy farmers are protected through the next number of months,” he said, “and this means at a minimum, holding prices at their current levels.”