The decision last week by Dairy Industry Ireland (DII) to introduce a second base on which milk price is reported has put co-op boards in the firing line. Questions are being asked if it is co-op management or boards that are calling the shots on milk price and how it is reported.
While some co-ops have decided to postpone announcing milk price at higher protein and fat levels, Glanbia has pushed ahead with the move. In an announcement on Friday, which saw the processor remove a 0.4c/l bonus, Glanbia Ireland reported a milk price of 35.1c/l (inc VAT) at 3.3% protein and 3.6% butter fat. Alongside this, it reported a price of 38.32c/l (inc VAT) based on LTO constituents of 3.4% protein and 4.2% butterfat.
The decision to quote the Dutch Federation on Agriculture and Horticulture (LTO) price is being put forward by management on the basis of increased transparency. But it is notable that the Glanbia announcement didn’t report the actual Glanbia price based on average solids supplied by its farmers, as it did in January. Also, the price includes VAT, which the LTO price excludes, as we do in the monthly league. So clearly transparency is not improved.
Meanwhile, Kerry suppliers received three different milk prices this month with the processor also including the price at LTO milk solids.
The move raises more questions than answers. The industry moved away from differential pricing almost 10 years ago with milk solids in €/kg the payment currency for 90% of our processors. So why introduce another metric that does not reflect the basis on which milk is valued? In the Irish Farmers Journal, we changed our reporting on the monthly milk league to €/kg milk solids at modern solids over five years ago – it beggars belief why farmers are now getting a signal that cent per litre is still the measure.
Co-op board members now have a big call to make ... will they respond to the demands of farmers and seek to reverse the move?
As reported in this week's edition, the IFA believes it is an attempt by management to “poach” the gains farmers have made in improving milk solids in an attempt to suggest they are returning a better milk price. The IFA has put a very clear challenge to the board members of co-ops: stand up and be counted. It sees an attempt by management, through Dairy Industry Ireland (DII), to take control of milk pricing as a watershed moment for the industry.
It is worth pointing out that this is not an isolated incident. In the past, the Irish Farmers Journal has expressed concern as to the extent to which co-op boards were allowing management attempt to influence the transparency around the Irish Farmers Journal-KPMG annual manufacturing milk price review.
Most recently, the extent to which the co-op boards of Aurivo and Arrabawn withdrew from the process largely due to frustration within management that the price paid for liquid milk could not be included in a manufacturing price review.
PPI concerns
More recently we saw farmer concerns ignored in the review of the Ornua Purchase Price Index (PPI). In the absence of any independent review and in the face of farmer opposition, the decision was taken by the board of Ornua to increase the processing costs when calculating the PPI from 6.5c/l to 7c/l. The 7.6% increase since 2016 was despite a 50% increase in throughput, cheaper energy, modernised facilities and ongoing improvement in milk quality over this period with no suggestion of a downward review. The reality is that the slippage in farmers’ influence over how milk price is reported has been ongoing for some time. However, the fallout to the recent move is by far the most public, largely due to the fact that it was clearly led by management through the auspices of DII.
Co-op board members now have a big call to make. Are they going to stand back from the situation, ignore the farm organisations and allow for the new management-led price reporting structure to continue? Or will they respond to the demands of farmers and seek to reverse the move? Neither option is straight forward and will require big calls.
Questions should also be asked as to how co-op boards have been allowed find themselves in this position. This should start by looking at the remit of DII and the extent to which it interacts with ICOS – and in particular the farmer-led dairy committee – all of which are funded by farmers and therefore must be in a position to prove their value to those milking the cows.
\ Jim Cogan
Trade: new leader but old problems remain at WTO
After months of wrangling, the World Trade Organisation (WTO) has appointed a new director general, Dr Ngozi Okonjo-Iweala. The Nigerian economist is the first female and first African to take charge of the body responsible for shaping and enforcing the rules of global trade.
Okonjo-Iweala takes the helm as the WTO struggles to maintain relevance. It has two primary functions: promoting multilateral trade deals and preventing global trade wars. In its 25-year history, it has failed to deliver any significant multilateral deal with agricultural subsidies proving one of the major stumbling blocks.
In more recent times, its ability to preside over trade disputes has been prevented by the failure of the Trump administration to appoint new members to the organisation’s dispute settlement body. Trade wars between China and the US and trade tensions between the US and EU all surfaced within the vacuum created.
The first challenge for Okonjo-Iweala will be to bring the US on side. While she will be hoping that President Biden will be more amenable to addressing the current stand-off, the new administration has so far adopted a cautious approach to trade.
As Ireland’s agri-food industry becomes increasingly exposed to the global trading landscape, the ability of the WTO to ensure a level playing field in terms of market access and tariff barriers will be critical.
Brexit: EU-UK vet deal critical for agri-food sector
The need for veterinary certification and 30% physical inspections on animal and health products traded between the European Union and the UK risks long-term damage to the agri-food industry in both Britain and Ireland.
The UK minister responsible for agriculture, George Eustice, seemed to indicate recently that the UK was open to some sort of veterinary agreement with the EU. Such a move would make complete sense for as long as the UK remains aligned to EU standards – both in terms of domestic production and imports.
If it could be achieved through the EU-UK Partnership Council, it would go a long way to easing the tensions on trade.
Canada and New Zealand have Sanitary and Phytosanitary (SPS) agreements in place with the EU that provide for relatively light-touch SPS controls – 1% physical inspections for meat in the case of New Zealand and 10% for Canada.
Switzerland and Norway are completely aligned with the EU.
If the UK could align with EU veterinary controls, then the largest barrier to trade would be removed – and this would be to the benefit of the entire agri-food industry on these islands.
Trade: the power of China over global markets increasingly evident
China’s influence over global commodity markets is on full display. Strong internal demand has seen record purchases of US corn and a surge in imports of soya beans, forcing US bean stocks down to a seven-year low.
Markets have responded quickly with US corn and soya bean futures reaching a six- to seven-year high. There are also reports of China securing large volumes of both urea and DAP in a global market where supplies are tight due to manufacturing constraints.
As we report this week, the impact on fertiliser prices has been swift with sharp increases across the board. Global dairy markets are also being affected with strong Chinese demand driving recent GDT auctions. The country’s import demand is also underpinning the global market for meat proteins including beef, lamb and pigmeat.
As Michael McKeon reports in our pig Focus this week, China now consumes 55% of EU pigmeat exports.
The decision last week by Dairy Industry Ireland (DII) to introduce a second base on which milk price is reported has put co-op boards in the firing line. Questions are being asked if it is co-op management or boards that are calling the shots on milk price and how it is reported.
While some co-ops have decided to postpone announcing milk price at higher protein and fat levels, Glanbia has pushed ahead with the move. In an announcement on Friday, which saw the processor remove a 0.4c/l bonus, Glanbia Ireland reported a milk price of 35.1c/l (inc VAT) at 3.3% protein and 3.6% butter fat. Alongside this, it reported a price of 38.32c/l (inc VAT) based on LTO constituents of 3.4% protein and 4.2% butterfat.
The decision to quote the Dutch Federation on Agriculture and Horticulture (LTO) price is being put forward by management on the basis of increased transparency. But it is notable that the Glanbia announcement didn’t report the actual Glanbia price based on average solids supplied by its farmers, as it did in January. Also, the price includes VAT, which the LTO price excludes, as we do in the monthly league. So clearly transparency is not improved.
Meanwhile, Kerry suppliers received three different milk prices this month with the processor also including the price at LTO milk solids.
The move raises more questions than answers. The industry moved away from differential pricing almost 10 years ago with milk solids in €/kg the payment currency for 90% of our processors. So why introduce another metric that does not reflect the basis on which milk is valued? In the Irish Farmers Journal, we changed our reporting on the monthly milk league to €/kg milk solids at modern solids over five years ago – it beggars belief why farmers are now getting a signal that cent per litre is still the measure.
Co-op board members now have a big call to make ... will they respond to the demands of farmers and seek to reverse the move?
As reported in this week's edition, the IFA believes it is an attempt by management to “poach” the gains farmers have made in improving milk solids in an attempt to suggest they are returning a better milk price. The IFA has put a very clear challenge to the board members of co-ops: stand up and be counted. It sees an attempt by management, through Dairy Industry Ireland (DII), to take control of milk pricing as a watershed moment for the industry.
It is worth pointing out that this is not an isolated incident. In the past, the Irish Farmers Journal has expressed concern as to the extent to which co-op boards were allowing management attempt to influence the transparency around the Irish Farmers Journal-KPMG annual manufacturing milk price review.
Most recently, the extent to which the co-op boards of Aurivo and Arrabawn withdrew from the process largely due to frustration within management that the price paid for liquid milk could not be included in a manufacturing price review.
PPI concerns
More recently we saw farmer concerns ignored in the review of the Ornua Purchase Price Index (PPI). In the absence of any independent review and in the face of farmer opposition, the decision was taken by the board of Ornua to increase the processing costs when calculating the PPI from 6.5c/l to 7c/l. The 7.6% increase since 2016 was despite a 50% increase in throughput, cheaper energy, modernised facilities and ongoing improvement in milk quality over this period with no suggestion of a downward review. The reality is that the slippage in farmers’ influence over how milk price is reported has been ongoing for some time. However, the fallout to the recent move is by far the most public, largely due to the fact that it was clearly led by management through the auspices of DII.
Co-op board members now have a big call to make. Are they going to stand back from the situation, ignore the farm organisations and allow for the new management-led price reporting structure to continue? Or will they respond to the demands of farmers and seek to reverse the move? Neither option is straight forward and will require big calls.
Questions should also be asked as to how co-op boards have been allowed find themselves in this position. This should start by looking at the remit of DII and the extent to which it interacts with ICOS – and in particular the farmer-led dairy committee – all of which are funded by farmers and therefore must be in a position to prove their value to those milking the cows.
\ Jim Cogan
Trade: new leader but old problems remain at WTO
After months of wrangling, the World Trade Organisation (WTO) has appointed a new director general, Dr Ngozi Okonjo-Iweala. The Nigerian economist is the first female and first African to take charge of the body responsible for shaping and enforcing the rules of global trade.
Okonjo-Iweala takes the helm as the WTO struggles to maintain relevance. It has two primary functions: promoting multilateral trade deals and preventing global trade wars. In its 25-year history, it has failed to deliver any significant multilateral deal with agricultural subsidies proving one of the major stumbling blocks.
In more recent times, its ability to preside over trade disputes has been prevented by the failure of the Trump administration to appoint new members to the organisation’s dispute settlement body. Trade wars between China and the US and trade tensions between the US and EU all surfaced within the vacuum created.
The first challenge for Okonjo-Iweala will be to bring the US on side. While she will be hoping that President Biden will be more amenable to addressing the current stand-off, the new administration has so far adopted a cautious approach to trade.
As Ireland’s agri-food industry becomes increasingly exposed to the global trading landscape, the ability of the WTO to ensure a level playing field in terms of market access and tariff barriers will be critical.
Brexit: EU-UK vet deal critical for agri-food sector
The need for veterinary certification and 30% physical inspections on animal and health products traded between the European Union and the UK risks long-term damage to the agri-food industry in both Britain and Ireland.
The UK minister responsible for agriculture, George Eustice, seemed to indicate recently that the UK was open to some sort of veterinary agreement with the EU. Such a move would make complete sense for as long as the UK remains aligned to EU standards – both in terms of domestic production and imports.
If it could be achieved through the EU-UK Partnership Council, it would go a long way to easing the tensions on trade.
Canada and New Zealand have Sanitary and Phytosanitary (SPS) agreements in place with the EU that provide for relatively light-touch SPS controls – 1% physical inspections for meat in the case of New Zealand and 10% for Canada.
Switzerland and Norway are completely aligned with the EU.
If the UK could align with EU veterinary controls, then the largest barrier to trade would be removed – and this would be to the benefit of the entire agri-food industry on these islands.
Trade: the power of China over global markets increasingly evident
China’s influence over global commodity markets is on full display. Strong internal demand has seen record purchases of US corn and a surge in imports of soya beans, forcing US bean stocks down to a seven-year low.
Markets have responded quickly with US corn and soya bean futures reaching a six- to seven-year high. There are also reports of China securing large volumes of both urea and DAP in a global market where supplies are tight due to manufacturing constraints.
As we report this week, the impact on fertiliser prices has been swift with sharp increases across the board. Global dairy markets are also being affected with strong Chinese demand driving recent GDT auctions. The country’s import demand is also underpinning the global market for meat proteins including beef, lamb and pigmeat.
As Michael McKeon reports in our pig Focus this week, China now consumes 55% of EU pigmeat exports.
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