There was blood on the parlour floor this week, as all of the co-ops slashed milk price for August deliveries. It would be plain wrong not to highlight the changes in the market at present. These changes have seen the spot price for butter fall by €1,400/t over the last four weeks, which is a 20% drop. Other products have fallen too, but not by quite as much as butter.

It would also be wrong not to question the timing of the milk price cuts. Don’t forget, the current Milk League is based on August milk deliveries, when the market was still strong and commodity prices were a lot higher than they are now. You could understand why September milk price would be under pressure, but why August?

Some co-op managers have been saying to me privately that the milk price was too high all summer, relative to market returns. Is it a case that co-ops have taken the opportunity of the current market dip to correct their own prices? If that’s not the case, then what does it say about the co-ops ability to forward sell when prices are high and lock in a decent milk price for their farmer shareholders?

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Looking at the league table, all of the co-ops have cut prices. The smallest cut was for Lakeland, which cut by 13c/kg MS to €6.265/kg MS. That takes it out from division three and into division two. The largest cut was for Dairygold, which knocked 40c/kg MS off its price to bring it to €5.988/kg MS. It’s a big drop and it caused a big stir, but Tirlán wasn’t far behind with a 33c/kg MS price drop. Between them, these two big co-ops process about half of the milk in the country, so their price has a disproportionate impact on the entire sector.

Both are highly exposed to commodity price, but so too are most of the rest of the co-ops, with the exception of Kerry Dairy Ireland with its branded business and Carbery with its whey protein isolate facility.

Then again, look at Aurivo, which has neither brands nor high value protein and it has been knocking on the door of division one for most of the year.

For some international context to milk price, the Friesland Campina price for August was 46.73c/l ex VAT and the Arla price was 43.9c/l also ex VAT. Both co-ops have cut the price of September milk to 46.3c/l and 42.96c/l respectively. These prices are at 3.3% protein and 3.6% fat and exclude any bonuses.