There was some very straight talking at the Teagasc Winter milk meeting in Navan, Co Meath, last week.
Farmers vented frustration at the continuous erosion of the farmer margin in liquid milk and the undercutting of liquid milk price contracts between member co-ops.
The top table argued back that farmers are in control on co-ops and the fact of the matter is it is against competition laws for co-ops to collude on setting prices for products.
When questions came from the floor it was crystal clear some farmers were worried about the future of winter milk production.
One farmer argued that it’s time we had a real debate on the elephant in the room – on where the sector is going.
He said: “How we get there won’t happen unless we have debate on it. Will it be rationalisation by evolution? And can the industry survive it? We need to debate it among co-ops and farmers on the ground.”
ICOS presentation
In his address to the farmers, ICOS boss TJ Flanagan outlined the domestic and imported fresh milk used over the winter months.
He said: “We need to have 40 million litres per month domestically and that is sold in one-, two- and now three-litre cartons.
"The fact of the matter is that there is enough milk to far exceed that in October and November so the winter period where fresh milk is not as plentiful is now not five months, but two months.”
Later in the day, farmers suggested two months doesn’t work for them when trying to plan calving and feeding a proportion of the herd.
TJ continued: “In October, we have 400m litres of surplus milk while in November we have almost 300m litres surplus for manufacturing. December is tighter but there is still 150m litres surplus over liquid requirement.”
He said the fact of the matter is that there is plenty of milk around in the winter months and even if exports disappeared there was still 23% headroom.
So as of now, there isn’t a shortage of milk for packing into domestic consumption and that is quality milk from quality producers.
The ICOS boss then went on to explain his views on the various parts of the supply chain – from the customer (buyer of milk in winter months), the farmer and from the processor perspective.
Customer
TJ’s line on customers again didn’t go down well with farmers. He said: “Remember customers (buyers of liquid milk) can get year-round supply at basic price without paying any premium. They can get a supply of fresh product with no premium, because milk is milk.
“Yes, the customer would like winter-produced milk rather than milk from late spring-calving cows, but they can get other milk for no premium. In other parts of the world, the liquid-type premiums are just not available. Buyers watch daily Irish news feeds so there are few surprises.”
Farmers
TJ then went on to look at it from the farmers’ perspective. He said: “I rang around some farmers – the message I was getting is since quotas went the autumn has opened up and there is more quality milk around.
"Yes, farmers want more winter premium, if it was available, but on the same hand they can’t ignore the economics at farm level of producing milk at grass. To leave that lower-cost spring model, they need some incentive.
“The message I was getting is earlier autumn calving (August/September) is less and less. Remember also a good few co-ops have both northern and southern milk pools. The northern pool peaks in January when the southern is at it lowest, so that pool is available to co-ops.”
Milk processors
After that, TJ started to look at it from a plant (processors’) perspective and again he had no good news for farmers.
He said: “Does it make sense for processors to install formal winter milk schemes?
The message I got from processors was that there is not enough in it to counteract the farmer efficiencies from producing milk from grass.
"The market is just not prepared to pay it now. They will continue to do some (liquid/winter) milk for customer demand as it arises, but, essentially no big change is coming in this space.”
In the question and answer session at the end of the presentations, some farmer frustration at the margin left for the farmer emerged, with questions directed at ICOS boss TJ Flanagan.
Kildare farmer and outgoing Fresh Milk Producers chair Larry Hannon asked: “TJ, why are you here and what do you represent? The role of the retailer and processor is part of the whole mix.
"The reality is any pressure on trade comes back to bite us the farmer. You are there to represent us, to create a sustainable structure – so how do you see that working?”
TJ replied: “Co-op board members set the strategy and co-op management set the detail of tenders, etc.
"We (ICOS) support the boards and co-op about how to devise strategy so members don’t just have to take what is suggested by management.
“Yes I understand frustration from farmers at perennially being squeezed, but the reality is farmers as board members still have access to the top table, which is a good thing.”
Another frustrated farmer suggested what was happening around the annual contracts for fresh milk with retailers was absolute lunacy.
He said: “TJ spoke about branded milk and that’s fine – but the lunacy of the last two years where co-ops undercut each other for market share is unsustainable.
"It’s time common sense impacted on actions because it always ends at the farmer’s door. We are giving away margin to supermarkets and there will be no business unless cop-on is part of the picture.”
Branded milk
TJ also gave his views on the possibility that the sector could get all the required liquid milk needs from a smaller panel of producers or the possibility of the co-ops ring-fencing the farmers price so margin isn’t always squeezed.
TJ’s answer to this was, “yes really simple to make this happen and it’s call branded milk – ‘Premier’, ‘Champion’ or ‘Nenagh’ milk – great way to get do it, but, branded milk is now at 35% of the market and falling. The UK is now over 90% private label (own label).
“Yes, there have been some initiatives in some UK supermarkets like Morrisons that deliver a 10p/litre extra and that goes directly back to the farmer but ultimately these type of initiatives didn’t get traction.
“Competition law impacts against co-op actions. Imports are always present, so if a co-op walks away from a contract there is always someone to take it up.”
Farmer anger at erosion of margin in liquid milk as retailers make co-ops fight for contracts.Large surpluses of milk produced during winter months mean less requirement to pay farmers a premium. From a processor perspective not much reason to pay more for winter supplies.
There was some very straight talking at the Teagasc Winter milk meeting in Navan, Co Meath, last week.
Farmers vented frustration at the continuous erosion of the farmer margin in liquid milk and the undercutting of liquid milk price contracts between member co-ops.
The top table argued back that farmers are in control on co-ops and the fact of the matter is it is against competition laws for co-ops to collude on setting prices for products.
When questions came from the floor it was crystal clear some farmers were worried about the future of winter milk production.
One farmer argued that it’s time we had a real debate on the elephant in the room – on where the sector is going.
He said: “How we get there won’t happen unless we have debate on it. Will it be rationalisation by evolution? And can the industry survive it? We need to debate it among co-ops and farmers on the ground.”
ICOS presentation
In his address to the farmers, ICOS boss TJ Flanagan outlined the domestic and imported fresh milk used over the winter months.
He said: “We need to have 40 million litres per month domestically and that is sold in one-, two- and now three-litre cartons.
"The fact of the matter is that there is enough milk to far exceed that in October and November so the winter period where fresh milk is not as plentiful is now not five months, but two months.”
Later in the day, farmers suggested two months doesn’t work for them when trying to plan calving and feeding a proportion of the herd.
TJ continued: “In October, we have 400m litres of surplus milk while in November we have almost 300m litres surplus for manufacturing. December is tighter but there is still 150m litres surplus over liquid requirement.”
He said the fact of the matter is that there is plenty of milk around in the winter months and even if exports disappeared there was still 23% headroom.
So as of now, there isn’t a shortage of milk for packing into domestic consumption and that is quality milk from quality producers.
The ICOS boss then went on to explain his views on the various parts of the supply chain – from the customer (buyer of milk in winter months), the farmer and from the processor perspective.
Customer
TJ’s line on customers again didn’t go down well with farmers. He said: “Remember customers (buyers of liquid milk) can get year-round supply at basic price without paying any premium. They can get a supply of fresh product with no premium, because milk is milk.
“Yes, the customer would like winter-produced milk rather than milk from late spring-calving cows, but they can get other milk for no premium. In other parts of the world, the liquid-type premiums are just not available. Buyers watch daily Irish news feeds so there are few surprises.”
Farmers
TJ then went on to look at it from the farmers’ perspective. He said: “I rang around some farmers – the message I was getting is since quotas went the autumn has opened up and there is more quality milk around.
"Yes, farmers want more winter premium, if it was available, but on the same hand they can’t ignore the economics at farm level of producing milk at grass. To leave that lower-cost spring model, they need some incentive.
“The message I was getting is earlier autumn calving (August/September) is less and less. Remember also a good few co-ops have both northern and southern milk pools. The northern pool peaks in January when the southern is at it lowest, so that pool is available to co-ops.”
Milk processors
After that, TJ started to look at it from a plant (processors’) perspective and again he had no good news for farmers.
He said: “Does it make sense for processors to install formal winter milk schemes?
The message I got from processors was that there is not enough in it to counteract the farmer efficiencies from producing milk from grass.
"The market is just not prepared to pay it now. They will continue to do some (liquid/winter) milk for customer demand as it arises, but, essentially no big change is coming in this space.”
In the question and answer session at the end of the presentations, some farmer frustration at the margin left for the farmer emerged, with questions directed at ICOS boss TJ Flanagan.
Kildare farmer and outgoing Fresh Milk Producers chair Larry Hannon asked: “TJ, why are you here and what do you represent? The role of the retailer and processor is part of the whole mix.
"The reality is any pressure on trade comes back to bite us the farmer. You are there to represent us, to create a sustainable structure – so how do you see that working?”
TJ replied: “Co-op board members set the strategy and co-op management set the detail of tenders, etc.
"We (ICOS) support the boards and co-op about how to devise strategy so members don’t just have to take what is suggested by management.
“Yes I understand frustration from farmers at perennially being squeezed, but the reality is farmers as board members still have access to the top table, which is a good thing.”
Another frustrated farmer suggested what was happening around the annual contracts for fresh milk with retailers was absolute lunacy.
He said: “TJ spoke about branded milk and that’s fine – but the lunacy of the last two years where co-ops undercut each other for market share is unsustainable.
"It’s time common sense impacted on actions because it always ends at the farmer’s door. We are giving away margin to supermarkets and there will be no business unless cop-on is part of the picture.”
Branded milk
TJ also gave his views on the possibility that the sector could get all the required liquid milk needs from a smaller panel of producers or the possibility of the co-ops ring-fencing the farmers price so margin isn’t always squeezed.
TJ’s answer to this was, “yes really simple to make this happen and it’s call branded milk – ‘Premier’, ‘Champion’ or ‘Nenagh’ milk – great way to get do it, but, branded milk is now at 35% of the market and falling. The UK is now over 90% private label (own label).
“Yes, there have been some initiatives in some UK supermarkets like Morrisons that deliver a 10p/litre extra and that goes directly back to the farmer but ultimately these type of initiatives didn’t get traction.
“Competition law impacts against co-op actions. Imports are always present, so if a co-op walks away from a contract there is always someone to take it up.”
Farmer anger at erosion of margin in liquid milk as retailers make co-ops fight for contracts.Large surpluses of milk produced during winter months mean less requirement to pay farmers a premium. From a processor perspective not much reason to pay more for winter supplies. 
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