Farm leaders in Northern Ireland have called for an urgent debate on mandatory milk contracts after some processors cut May base prices.
Ulster Farmers Union deputy president Victor Chestnutt said milk producers were understandably angry at the cuts.
“One processor has dropped their base price by 0.50p/litre to below 25p/litre. We can see no justification for this drop, if anything, the market is signalling prices should be rising,” Mr Chestnutt said.
The UFU added it was increasingly frustrated that “processors continue to blatantly refuse to share the positive returns with primary producers”.
Base price cut
“If mandatory contracts were in place, this unjustified cut to the base price could not have happened,” Mr Chestnutt insisted.
“Now is the time for a healthy debate. It is clear we need more transparency in the supply chain and to bring a stop to unexplained and unfounded drops in farm gate price,” he said.
Defra confirmed that the long-awaited UK-wide consultation on mandatory milk contracts would go ahead.
But a spokeswoman said that officials were still working on the consultation details.
Until that work has been completed, there remains no timeframe for the consultation document’s release, she added.
One of the key proponents for the consultation was former Defra minister George Eustice.
Before quitting in March over issues relating to Brexit, Mr Eustice said that changes to the way dairy contracts worked was inevitable.
“All too often farmers are price takers – they are captives,” he told delegates at the Semex conference in January.
Mr Eustice indicated that an element of the reform would be shorter notice periods of as little as four weeks for dairy farmers, if they were unsatisfied with the performance of their processor.
What has Defra indicated that contract reform should address?
- Contracts should have transparent pricing
- Prices should either be fixed or linked to market signals
- Minimum contract length should be much shorter than current terms
- Producer organisations should be encouraged
- Safety net provisions such as insurance should be promoted
Third consecutive fall at Global Dairy auction
Prices for global dairy commodities have fallen for the third consecutive time at the latest Global Dairy Trade (GDT) auction.
Key New Zealand and US dairy companies use the fortnightly auction to sell milk powder and other dairy products.
The latest auction, on 18 June, recorded that the GDT Index – representing a weighted average of the percentage change in prices for the commodities – was down by 3.8% to $3,208/t (£2,526/t).
Analysts suggested the drop was due to an increase in products on offer across the commodity types.
A total of 24,239 tonnes was sold – up by 22% on the previous auction at the start of June.
Of the products, the butter index showed the steepest decline at 5.7% to $4,553/t (£3,586/t) with prices down by 10% for July delivery contracts and 7.2% for August deals.
But whole milk powder (WMP) was identified as the key driver for the overall drop.
It makes up half the product sold and showed an above-average fall of 4.3% to $3,006/t (£2,367/t).
The drop in WMP prices was the sixth in a row at the GDT auction and levels decreased significantly across all contracts, particularly for July (4.7%) and August (5.3%).
GDT price changes
- Anhydrous milk fat index down 3.3%, average price US$5,530/t (£4,355/t)
- Butter index down 5.7%, average price US$4,553/t (£3,586/t)
- Cheddar index down 4.3%, average price US$3,781/t (£2,978/t)
- Lactose index down 2.2%, average price US$875/t (£689/t)
- Rennet casein index up 2.3%, average price US$7,494/t (£5,902/t)
- Skim milk powder index down 3.5%, average price US$2,358/t (£1,857/t)
- Whole milk powder index down 4.3%, average price US$3,006/t (£2,367/t)
Source: GDT. The next auction is due to take place on Tuesday, 3 July.