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Senator Lombard: “Milk suppliers with fixed contracts are going bankrupt”

Fixed price milk (FMP) contracts “will fail in the long term” unless the agreements are amended to include input costs, Fine Gael Senator Tim Lombard has warned.

The Cork Southwest representative and member of the Joint Oireachtas Agriculture Committee says suppliers with up to 80% of their milk tied to FMP contracts at 30-32 c/l risk going “bust” if the Market milk price reached 50 c/l.

It comes as Lakeland Dairies confirmed all of its suppliers with existing FMP contracts in the Republic will receive an additional payment of 8c/L from April to December 2022 to alleviate severe inflationary pressures on inputs.

Glanbia also agreed to pay a support payment of 3c/l for all milk delivered in April, while Carbery will also make a one-off payment of 5c/l to FMP suppliers this month.

But Mr Lombard, also a dairy farmer, is urging all dairy processors and Ornua – a co-op that sells dairy products on behalf of its processor members – to take more action.

“We’ve figured that out [show] Up to 3,000 farmers are affected,” he said. “Although this seemed to have been talked down by ICOS at committee level, we need them to give us the actual numbers.

“In my opinion, Ornua and the cooperative or SPS can lock in both inputs and outputs, however the farmer is the only entity in this three year contract that cannot lock in inputs – they bear all the risk.

“The contracts are a really important tool for market stability, but because of their formulation and the lack of a third pillar for the farmer, they will fail in the long term without real changes.

Conclude

Fine Gael Senator Tim Lombard says FMP deals will fail in the long run

“In an ideal contract, farmers would tie in the costs of inputs, feed and fertilizer. If they had this ability, they could – like the cooperatives or Ornua – work the edge in the middle. Because they don’t have that, they are completely exposed to the market. Some farmers I spoke to are trapped at 31-32c/l – 20c/l behind the current base price.

“For those who have tied up a significant amount of milk, the financial and mental pressure this creates is unbearable. They will literally go broke if nothing is done.

“Ornua came to the committee very slowly. We corresponded with them once and they basically fobbed us off. I have written to the committee again to ask Ornua to come – they have an important case to answer concerning these contracts.”

In response, a spokesman for Ornua stated: “We are always open to working with government officials and encourage collaboration between government and industry to resolve issues affecting the sector.

“However, as we understand it, Ornua is one of several companies that have entered into agreements to purchase dairy products from cooperatives at agreed product prices. We are not in a position to comment on individual milk contract agreements between cooperatives and the farmers who supply them.

“We are aware that fixed milk contract agreements are currently a challenge at farm level and we support our member co-operatives by offering flexibility in relation to fixed-price product agreements that we have with them, allowing co-operatives targeted support where it is most needed.”

https://www.independent.ie/business/farming/news/senator-lombard-milk-suppliers-on-fixed-contracts-are-going-broke-41680588.html Senator Lombard: “Milk suppliers with fixed contracts are going bankrupt”

Fry Electronics Team

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