Fundamental changes to the structure of fixed-milk-price (FMP) schemes will be required to rebuild farmers’ confidence in the trading mechanisms, the ICMSA has claimed.

ICMSA president Pat McCormack said the FMP concept had been severely damaged because of the lost incomes suffered by farmers supplying large volumes under such contracts.

Describing the experience of some farmers involved in FMP schemes over the last year as “scarifying and costly”, McCormack insisted that contracts will have to evolve in the future to take account of inflation.

“We think that future offerings will have to move to a more margin-orientated basis. Fixed-price schemes – or fixed-margin schemes as they will become – cannot end up really hurting either party,” he maintained.

“We are not disputing the validity of freely-entered-into contracts but ICMSA is firmly of the opinion that if fixed price schemes are going to have any future going forward in an era of inflation, then they must become more cognisant of changing commercial contexts,” McCormack said.

Surprise

The ICMSA leader expressed surprise that co-ops appeared “so determined” to hold participating farmers to the terms of existing contracts.

He claimed that “no one is going to be interested in the next round of FMP schemes” unless the interests of both farmers and processors were protected.

McCormack’s comments follow on from a recent letter to Dairygold suppliers in which the co-op insisted that FMP schemes were contracts that had to be honoured.

Dairygold ruled out offering specific supports to suppliers with large milk volumes tied into fixed-price contracts.

Meanwhile, although Glanbia moved to include a feed price adjuster into its latest FMP scheme for March/April, a spokesperson for the processor admitted that “uptake was lower than usual”.

Glanbia has 500 farmers with over 35% of their milk in FMP schemes. Some suppliers have in excess of 70% of milk tied in such schemes and are facing estimated income losses in excess of €200,000 in some cases for the period from 2021 to 2024.

Problems

Similar problems are reported by other processors, particularly Kerry Group and North Cork.

Laois ICMSA chair Donald Scully is one of the Glanbia suppliers with over one-third of his milk tied into a FMP scheme at 30-32c/l.

Scully described supplying milk at 20c/l below the market price as a “very disheartening experience”.

The Laois farmer insisted that he would not participate in an FMP scheme in the future, unless there was a mechanism in place which factored in input price changes.

“I have participated in practically all Glanbia’s fixed milk price schemes; the last time I just binned the form,” he said.