Milk margins now ‘dangerously close to being totally wiped out’

FARMGATE prices never reach the highs of the wholesale markets, so they should never go as low as the falling wholesale price. 

That’s according to the ICMSA dairy chairperson Noel Murphy who said that while dairy markets are under pressure at wholesale level which has resulted in co-ops imposing massive milk price cuts in the first two months of 2023, ‘it is time for these milk purchasers to show their mettle’ and ‘emphasise the benefits of our products in a way that raises them above base commodity spot prices.’

‘Against that principle, the base price of milk needs to be held at current levels, at a minimum, for the remainder of 2023,’ he said. 

‘Commodity spot prices spent over four months in the early to mid-60scpl 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 fertiliser 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,’ he pointed out. 

It’s getting ‘dangerously close to the disastrous 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   

Carbery reduced their milk price for January by 4cpl. 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. 

‘What’s even more unacceptable is that these savage cuts are happening at a time when consumers are still seeing food inflation; so someone along the line is effectively taking the farmers’ margin’, he said.   

He 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.