ICMSA Dairy chairperson, Noel Murphy, has called for a ‘hold’ on milk prices over the next number of purchaser announcements in order to relieve pressure on dairy markets.
“It has been well known and commonly accepted that farmgate prices never reach the highs of the wholesale markets, but the opposite should also be correct: farmgate prices should never go as low as the bottom falling wholesale price,” he said.
“Against that principle, the base price of milk needs to be held at current levels – at a minimum – for the remainder of 2023”.
The Dairy Chair said prices are now approaching a level where costs of production are exceeding base prices.
“ICMSA analysis shows that the cost of production for 2022 was more than 40cpl when fertiliser was purchased at the height of the market,” he said.
“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.
Murphy added that the sector was getting “dangerously close” to a “disastrous crossover point” where costs per litre exceed co-op payments.
“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,” he said.
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.