Ornua’s new €3-4m fund to support dairy farmers on FMP contracts

Ornua has intervened with a fund of 3 to 4 million euros to support dairy farmers locked into lengthy and unfavorable milk price maintenance contracts (FMP).

Ornua has offered its dairy processors a price increase on 10 per cent of their fixed volume contracts covering 2022 and 2023 as part of a new “volumetric flexible programme”.

It comes as some processors have recently announced additional payments on existing FMP contracts, leaving some suppliers of milk prices lagging current variable prices by as much as 20c/l to alleviate acute inflationary pressures on farm inputs.

Speaking of independent farming, John Jordan, CEO of Ornua, said: “We are absolutely aware that there are real hardship cases of farmers and farming families who are under financial stress and indeed psychological distress as a result of the situation they find themselves in.

“It is incumbent on everyone to stand up in the spirit of the cooperative and support these people.

“As a cooperative, we have offered our members a flexible volume metrics program. So when we have fixed volume contracts for products with our members, we offer to increase the price for 10 pieces of that volume for 2022 and then we take the same volume next year at the same increased price.”

The support is funded by Ornua. It is entirely independent of the payment supports recently brought in by individual dairy processors. We buy the product, cheese, butter, powder and what we have done is offer flexibility around these contracts for all our co-ops.”

Discussions are understood to be ongoing between Ornua – which accounts for about 32 per cent of the country’s annual fixed-volume milk pool – and its processing members over their intentions to accept the offer.

Ireland’s largest exporter of dairy products reported an operating profit of 153.7 million euros for 2021, up 1.3 percent.

Ornua, which is celebrating its 60th anniversary, also reported “excellent trading results” for the past year, with group sales up 6.9 percent to €2.5 billion.

Kerrygold’s volume growth is up 12 percent, with more than 11 million packets of butter and cheese sold worldwide each week. Strong returns were also reported for Irish dairy farmers over 389,000 tonnes of Irish produce purchased, delivering an additional €78 million in Ornua Value Payment to member suppliers, a 13.5 per cent increase on the previous year.

When asked about the distribution of profits in the dairy sector given the continued impact of skyrocketing inflation, Mr Jordan said: “If you look at our retained profitability, that’s a very, very modest number for the size of the business. Therefore we are very confident that we are paying a very good product price and additional returns in the Ornua Value Payment.

“Slower growth is certainly forecast in relation to future milk production in Ireland and contribution to climate change mitigation and sustainability.

“In terms of the economics of global dairy markets, demand is reasonably resilient but supply has been weak, which in the simplest economic sense means prices are rising.

“We don’t see an immediate pick-up in supply and as long as demand remains high in China, that means prices could be around this level or down a bit by the end of the year.”

https://www.independent.ie/business/farming/dairy/ornuas-new-3-4m-fund-to-support-dairy-farmers-on-fmp-contracts-41726773.html Ornua’s new €3-4m fund to support dairy farmers on FMP contracts

Fry Electronics Team

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