Concerns growing on milk price

At the time of writing, concern is growing rapidly about the speed with which milk price is falling. Farmers in several co-ops have lost 5c/L to 6c/L and more in just their last two months’ milk cheques. Pessimism about where milk price is going to land and how long it will languish ‘down there’ is widespread and many of us will recall that this could be the third time in a decade where our milk price has hovered at or around the costs of production. That 39-41c/L is both an economic and psychological mental barrier; falling below that is a disaster and just cannot happen. But it’s equally important to remember that we cannot become hypnotised by price and miss the more important element of margin. Too many in our sector fixate on price and fail to notice that it doesn’t matter what dizzying heights that reaches if inputs are following close on its heels.

Price falls

In light of the recent media furore on so-called ‘food inflation’ and the quite breathtakingly ignorant commentary from certain sources, it will be interesting to see if any of the journalists want to monitor the fall in farmer milk price and see how long that takes to work its way through to the checkout till? Our suspicion will be that the falls in farmer milk price will take their sweet time to be reflected in the price the retailers charge, if they are reflected at all. Every time this has happened before – even when the price paid to farmers for milk fell below the costs of production – the price paid by consumers never fell by a cent and the retailers just ‘ate up’ our margin and added it to their already generous share. It’s still possibly too early to ‘call’ the market, but our milk suppliers have already lost several thousand from their annual income and even the most detached co-op board must realise that there isn’t any more to cut.

Problem

On the topic of co-ops, ICMSA never bashes co-ops for going with an irresistible market trend. We don’t expect the co-op to ‘stand in the gap’ of a falling dairy market; we are at this a long time and we know where the powers and autonomy of an individual co-op begin and end. But we do have a problem with the fashion in which ‘forward contracts’ are bandied about to slow down price rises to farmers in a market going up but are strangely absent when the market is falling. When the GDT (Global Dairy Trade) and other indices all point to a surging market, we are told that our co-ops had ‘sold forward’ at lower prices than those currently applicable and so we farmers will have to wait another month or two for the current prices to work their way through. Bizarrely enough, it never works the other way: when the market is falling and our co-ops would have ‘sold forward’ at higher prices than currently applicable in a falling market, we are never insulated or buffered by that ‘forward’ deal. Heads we win, tails you lose.

Not the least most irritating aspect of this kind of Q3 serious drop in milk price is that we have a remedy for the ‘late in the day’ chaos it causes. We can’t fix the market, obviously, but we can fix the destructive volatility it has on the farmer’s income. In Budget 2026, ICMSA once again placed a fully regulated and supervised deposit scheme in front of the Irish Government that would deal with exactly this kind of sudden price and income drop that can catch the best of us out in terms of cashflow. 

Obstacles

For the best part of a decade now, we have been urging the Government to accept that it is no longer possible to pretend that the kind of ruinous income volatility that we experienced several times over that period is not affecting the decisions of so many young people not to go into farming. We have repeatedly pointed out the results of our own young farmers groups and surveys that all identified that financial uncertainty and income volatility as the single biggest obstacle to the really critical problems we are now experiencing in convincing the next generation of farmers to commit to the sector. I, myself, pointed out to ministers – Donohoe and Chambers – that farming is in competition with the tech and pharma industries for those young people and those employers can tell ‘our’ young people what they’ll be earning next year to within €10. Back on their home farms, we can’t even tell them to within €10,000 what they’ll be earning next year.

The Irish Government can’t do anything about falling milk price. Actually, they probably could, but that would involve them granting the powers requested by the Agri-Food Regulator and we are working hard to convince them to do just that. But they could do something on the broader question of income stability and they could do it very easily by adopting the ICMSA measures. That they choose not to is nearly as alarming as the fall in milk price that’s going to reinforce the reluctance to ‘go farming’ of so many of those young people who we so desperately need.