Farmers not equipped to deal with milk price volatility

May 20th, 2016 10:10 PM

By Southern Star Team

IFA Dairy chairman Sean O'Leary.

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‘THERE can be no more milk price cuts. Farmers can take no more,’ was the clear message to the dairy industry by IFA president Joe Healy.

He was addressing a joint conference with FCStone ‘Making Risk Management Work for Farmers.’ Mrs Healy was adamant that farmers cannot be expected to bear the market risk from volatile milk prices and still expand production just to fill capacity. 

The IFA president said: ‘After five years of major investment, co-op management teams and boards must take stock and find cost savings and efficiencies in every area of operation. Consolidation, joint ventures, co-operation must come back to the fore.’

Expanding on the key issue of farm incomes, which he identified in his AGM speech last week, Joe Healy said: ‘Most farmers now produce below break-even. With low milk prices, high spring feed, tax and superlevy bills, farm cashflow is stretched to the limit.  ‘We know markets will recover when supply and demand rebalance. But we also know that bad times, as well as good, will come again: this is what volatility means.’  

He said co-ops must give stronger signals of what market demand exists at a viable milk price, and let farmers make informed decisions on volumes over and above that: ‘This is not about production management, which doesn’t work in a global market.  It is about rethinking the sector’s development strategy to share the risk more fairly.’

Joe Healy said farmers are not equipped to cope with prolonged periods of low prices and the volatile incomes that are now the norm. 

Dairy farmers are learning this the hard way in 2016, as the dairy market downturn is lasting longer than anyone expected.  

IFA Dairy chairman Sean O’Leary said the dairy sector needs to equip itself to be more sustainable in the face of volatile markets, including prolonged downturns. He promised that the IFA will continue to work hard challenging banks to be more proactive and price competitive with both cashflow and investment financing.  Mr O’Leary added: ‘We need the incoming Minister for Agriculture to support strongly IFA’s proposals for volatility-friendly farm taxation to allow individual farmers to smooth out their incomes between good and bad years.’

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