This week, Aurivo and Arrabawn decided to pull out from the KPMG/Irish Farmers Journal milk price review (see links at the end of the story for details).
Why is it important to have an independent milk price measure? We are very lucky that farmers own most of the milk processing units here in Ireland. Essentially, it has allowed the industry to grow as the quota shackles came off as farmers have invested in the business to allow the extra milk be processed.
During the growth phase, managing the business is key and the balancing act of paying the bank repayments while paying farmers a decent price for the extra milk often comes unstuck unless properly managed.
Putting the liquid money into the overall pot just to make the co-op payment look better is not in the best interests of farmers
Keeping farmers informed of how the business is performing and up to speed with what is happening in the business, in terms of investment and milk price comparisons, is key to success.
Milk price is one barometer and only one measure.
Farmers should be crystal-clear on what it is the co-op paid and how that compares to others. We need a fair comparison - as fair as possible. Ireland is the only European country that has such a seasonal supply - hence, manufacturing milk is the best measure.
For Ireland, the majority of the milk is manufacturing milk, so in the KPMG exercise milk purchased on a liquid contract and used in liquid is excluded - rightly or wrongly.
I have no problem with Glanbia, Arrabawn, Aurivo, and now Lakeland following the LacPatrick acquisition, paying extra for liquid milk and the co-ops getting credit for paying out that money.
However, lumping it on top of the manufacturing milk price does not improve accuracy or transparency for farmers.
If those co-ops involved want to inform suppliers of the additional money paid out in liquid contracts to liquid suppliers that's no problem. However, putting the liquid money into the overall pot just to make the co-op payment look better is not in the best interests of farmers.
It is a pity both Arrabawn and Aurivo have pulled out because now milk suppliers in both co-ops have no independent measure.