Glanbia accused of ‘short-changing’ after dropping prices

Glanbia has been accused of "short-changing" suppliers after it cut base milk prices to 22 cent a litre, their lowest level in seven years, amid the ongoing downturn in dairy markets.

The company said the move was in response to weaker returns, while noting a significant portion of its suppliers were on fixed-price contracts, which shielded them from the worst of the slump.

The Irish Farmers’ Association (IFA), however, hit out at the Kilkenny-based company, claiming it was unacceptable for co-ops to let farmers carry 100 per cent of the market risk. IFA national dairy chairman Seán O’Leary said the move short-changed Glanbia suppliers and strongly suggested the company was seeking to keep the cost of milk below that paid by other co-ops.

“Glanbia is paying farmers the lowest possible base price while utilising the co-op’s resources – farmers’ own money – and the bonus received from Ornua to prop up the price,” he said.

Rival dairy co-op Lakelands also reduced its base price by 1 cent to 24 cents while Dairygold, Carbery and Kerry are due to set their prices in the coming days.

The average milk price paid to farmers here has fallen from 38 cent a litre in 2014 to a current rate of 24-25 cent a litre. A glut in production globally but more recently in Europe following the removal of quotas, a slowdown in Chinese demand and Russia's trade embargo, have fuelled the worst market slump in a decade.

Exporter

Earlier in the week, Ornua, Ireland’s largest dairy exporter, announced the suspension of its milk levy from May 1st. The co-op deducts a tariff of 0.14 cent per litre from dairy farmers in return for marketing Irish dairy produce abroad.

Ornua said it would reconsider the levy, which is worth about €6 million – equivalent to €350 per farmer, when prices had returned to 30.5 cent a litre for at least three months.

The latest Global Dairy Trade auction, which sets the international reference price, provided grounds for optimism with key wholemilk prices rising 2.1 per cent. However, most experts are not predicting a significant recovery in prices until at least 2017.