Anger at Kerry liquid milk price cuts

By Pat O'Keeffe

Liquid milk suppliers to Kerry Group have expressed shock at the extent of the milk price cuts announced by the company last week.

IFA liquid milk committee chairman Donal Kelleher said that he feared few suppliers realised just how severely the new pricing structure will affect them.

Suppliers of liquid milk to Kerry will in future receive a winter bonus for just four months per year, compared to seven months under the old structure. Constituents will now also be taken into account, although producers can choose a flat rate payment option.

"The cases we have examined stand to lose between nine and 14 c/gallon over their overall annual milk supply - even assuming a static manufacturing milk price - depending on the percentage of liquid milk they supply, and their milk constituents. For those particular farmers, the most favourable option in the new system would lead to an immediate loss of €7,000 to €23,000, depending on the size of their enterprise,'' Donal Kelleher said.

He yesterday welcomed Kerry's agreement to advise each individual supplier how the new pricing structure will affect their milk price and total revenue. This followed earlier claims by the IFA that the extent of the price cut was far in excess of the 6c per gallon claimed by the company.

A spokesman for Kerry yesterday defended the new arrangements, saying that the company had no option but to change the pricing arrangements "to reflect the new market situation''. The spokesman pointed out that milk from Northern Ireland has now taken 16% of the Republic's liquid milk market. "We have to move to a sustainable business model to assure the future of our business and our suppliers,'' he said.

He added that a winter premium of 44c/gallon will be available to cover the increased costs involved in supplying milk from November to February.

Donal Kelleher criticised the fact that the new system bases their previously flat liquid price on constituents and links it to potentially more volatile manufacturing milk prices. "Although their milk is being sold on the profitable domestic liquid milk market, without reference to its protein and butterfat contents, Kerry suppliers will now be subjected to the vagaries of export dairy markets,'' he said. He added: "Kerry has the chance now to revisit this totally unacceptable pricing change. If it fails to do so, suppliers can only conclude that they are being abandoned, and Kerry has no commitment to the liquid milk business.''

On Monday night, the IFA met with members of the Kerry Liquid Milk Advisory Committee - the elected farmers representing liquid milk suppliers within the Kerry structure.