Northern Ireland dairies anxious over trade mark

Milk prices are currently breaking records. This week, the Republic's biggest processor, Glanbia, announced that it will pay farmers 39 cent a litre, an all-time high. At the same time, the Irish Dairy Board's purchase price index, showed that the returns on the sale of primary dairy products also went through the roof, hitting 133.5, indicating that their value has increased by a third in the past three years.

The increases are being driven by what is happening in the EU and world markets, which have reached a point where Irish farmers' groups are suggesting that suppliers should be getting closer to 41 cent a litre, which would be more than 10 cent – or 25 per cent more – than the average paid last year.

Until April 2015, the market in the Republic is tied to the quota system, which gives purchasers of raw milk, namely the diary co-ops, control over production in each region, which in effect means that they set prices paid to suppliers.

Depending on where they buy, consumers are paying between 70 cent and 75 cent a litre for private label milk in supermarkets and higher sums, up to €1.08 a litre for brands in the same multiples. These prices are ratcheted up again in convenience stores, where consumers can be charged about €1.25 a litre for brands.

According to official figures, the suppliers get about one-third of this, according to an Irish Farmers’ Association spokesman, who says that historically their share was about 40 per cent, but it has been falling as an overall proportion of what consumers hand over at the till for the last decade.

The last National Milk Agency’s annual report shows that consumers paid an average of 98 cent a litre for milk in 2011, and 36 per cent of this went back to farmers, who actually did better than in the previous year, when they got a 33 per cent share of an average consumer price that was just over 97 cent a litre.

While the quota system is due to end in 19 months, theoretically introducing a free market, there are growing concerns that the scope for competition in milk prices across Ireland is being limited.

The chief cause of this is the National Dairy Council's (NDC) trade mark. The council is a farmer-funded body that is meant to promote the benefits of milk consumption. In 2009, it introduced its trade mark scheme, which, heavily backed by an ad campaign featuring Munster and rugby star, Paul O'Connell, is designed to encourage consumers to buy "locally"produced milk.

The catch is that only milk produced and processed in the Republic qualifies for the mark, cutting out anyone based in Northern Ireland, which is responsible for 25 per cent of the milk consumed in the south. As a result, northern producers warn that if they are squeezed out of the market, consumers will lose out.

Dr David Dobbin, group chief executive of Dale Farm and United Dairies, one of the leading players in the north, says that the Dairy Council Northern Ireland has taken legal advice and is in the process of launching a case with the European Commission "on the grounds that the NDC campaign is a breach of the single market and free trade".

The Dairy Council Northern Ireland has raised the issue with the NDC and the Minister for Agriculture, Simon Coveney, as well as his opposite number in Westminster, Owen Paterson. It has also complained to the EU competition directorate and the Republic's Competition Authority.

It is understood that the authority replied last year saying that it is satisfied that the NDC campaign does not breach either domestic or European competition law, but it is continuing to investigate claims that the NDC and IFA have worked together on pressurising retailers into only stocking products that carry the trade mark.

Northern producers are concerned that the scheme specifically excludes northern Irish dairy companies and about reports that both the NDC and the IFA appear to be working together. An IFA spokesman says that there is “no joint campaign” but he stresses that the organisation is very supportive of the NDC project, primarily because it supports liquid milk producers in the Republic.